How to Budget For Beginners

budget for beginners

Looking to take control of your money? Want to improve your financial situation? Budgeting is absolutely the first place to start, let’s dive in!

budget for beginners

Step One is the Hardest

This step is going to be boring, possibly painful, and extremely eye opening.

You need to gather up all of your bank and credit card statements and, if you use cash, any receipts you may have laying around. You technically only really need to cover one month’s time to start, but if you have a few months of history that is going to be helpful.

What we are looking to accomplish here is to find out how much money we spend each month. Ultimately an average is okay, but gaining an understanding of where every dollar goes is going to make a massive difference in your financial health.

I personally prefer spreadsheets, I think they make this easier, but there are many different methods that work! Some prefer to do it by hand, there are dozens of budget apps, find a method you are comfortable with!

Check out this article I wrote about the 50/30/20 budgeting method!

What we will ultimately do is break the outflows of money into categories. The best part? The categories you choose are completely up to you and they can change any time! Do you need to get Starbucks once a week to make life worth living? We may need to discuss some other things if that is what keeps you going, but you can absolutely account for that in a budget!

For many, these are some pretty staple categories:

  • Housing

  • Utilities

  • Car payment

  • Internet

  • Phone

  • Insurance

  • Gas

  • Groceries

  • Child Care

  • Streaming services

The list could probably go on forever. Break down where you currently spend your money, build your categories around that, and list the amount you spent in the last month. It is extremely important that you are 100% honest with yourself here. Just because you spent a bunch of money that one time last month does not mean you shouldn’t list it here. Real success will not come if you leave things out.

I don’t want to get too far ahead here, but the next step is to break these down into fixed and variable expenses. Rent, for example, is going to be the same amount every month (pending any changes). Gas, however, will probably change month to month depending on how much you drove and the current price of gas.

You may be wondering why I haven’t brought up income yet. Personally, I believe the budget building process has to start with expenses. Many people who spend more than they make would get discouraged if they started right off the bat with income and likely just give up on the whole process.

Let’s avoid that.

By now, whether you wrote it out on paper, used a spreadsheet, or found a budgeting app you like, you should have a list of categories and dollar amounts that you spent in the last month (bonus points if you calculated an average of the last several months).

Now, we break these down one step further.

Identify which categories of expenses are required to keep you living. Things like housing and groceries come to mind here. Be honest, we will come back to this.


Now on to Income

If your job is salaried, as in you are paid the same amount every other week (or every week), this step is simple. Just list the amount of money you will bring in for the month. If you have a variable income, this step is not so simple, so I will focus on that here.

Over time, you will get a better feel for what months tend to bring more income, where there might be overtime or side hustle opportunities, and where you may need to cut back a bit.

Whether your income is fixed or variable, I would always recommend looking for ways to side hustle, invest, or generally increase your income!

If you are new to investing, check out this article breaking down 5 often asked questions about index investing!

What makes the most sense to me here is using a conservative number. Take the lowest amount you have made in a month and make that your starting point for building next month’s budget. That way if you make more, it can be saved, invested, or used to pay down debt!

monthly budget

Do Some Arithmetic

It becomes clear fairly quickly whether you are spending more than you bring in on average. According to, American household debt topped $14.6 Trillion in early 2021, so you are not alone if you are in debt.

What we want to do here is find a balance. Earlier we broke down which expenses are required to keep you alive, and which (looking at you, streaming services) were not.

Plain and simple, if you are spending more than you are making, you have no choice but to cut out the expenses that are not required. For now.

Cutting expenses sucks, quite frankly. We are on this Earth to live, and you never know what will happen tomorrow, so many like to avoid thinking about consequences and just go on spending like there is no tomorrow.

Anyone can find the balance, they just have to put the work in. Going into a little bit more credit card debt for a night out might feel like you are prioritizing living life, but a night out when you are debt free will feel just about one hundred times better (scientifically proven) (not actually, but trust me it is cool).

If you have cut all unnecessary expenses and still find that there is a gap between your income and total expenses, it is time to consider increasing your income. Side hustling has never been easier, if you have a Wi-Fi connection you are just a few months away from making some solid side income (I’m doing it myself with this website!). Take the initiative to go out and bring in some money!

Lastly, Look to Next Month

This practice of budgeting is going to require work and patience. It will not be perfect, especially in the beginning. As with all things, practice helps tremendously!

Take what you have built and project what will happen next month. This will give you guidelines and the practice of recording expenses will help considerably in keeping you mindful of your spending.

Update your budget over the course of the month, and at the end of the month, make any necessary revisions for the month after that and give it a shot!

Thank you so much for taking the time to read this! If you have any questions, suggestions, or comments please do not hesitate to reach out!

My contact information can be found here!


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