Manage your money better with these tips on how to budget for beginners. Stretch your money further, tackle debt and live a comfortable life with your new money budget.
“Budgeting is not just for people who do not have enough money. It is for everyone who wants to ensure that their money is enough.”
Budgeting Tips for Beginners
It might seem overwhelming to learn how to budget as a beginner. But I promise it’s easier than you think.
Once you’ve familiarized yourself with a couple budgeting principals, you’ll finally be ready to take full control of your finances and really start saving!
As you read through this article you’ll not just learn about budgeting tips for beginners but also everything else you’ll need to know to craft a easy-to-follow budget and save like a pro.
Setting Clear Budget Goals
Crafting and sticking to a new budget requires a bit of motivation at first but quickly turns into a favorite habit for some. And just like anything you want to achieve it’s important you outline clear goals to not only guide you along the way but measure your progress towards the end goal.
So let’s stats with step one.
Define Your “Why”
What’s the reason for you to start budgeting? Is it to pay off debt, save for a car or trip? Maybe you want to budget just so you don’t have to stress about money each month.
Whatever your reason is, it’s important you define your “why.”
The purpose of me stressing the need for a “why” is because budgeting, especially as a beginner, requires a good amount of discipline and conscious effort. (I’ll talk later about how to make it easier and automate the process)
To help define your goals you’ll need to do more than just think about them. Get visual with it! Whether that be a budget motivation list, quotes to recite, or a vision board. Your budgeting goals needs to be at the top of your mind over a prolonged period of time.
Set Financial Goals
Now that you know your “why” it’s time to define some financial goals. What I mean by that is hard numbers.
If you want to pay off debt, how much are you trying to save each month to accomplish that?
If you need to build an emergency fund, what is the total amount you need to cover 6 months of expenses? How do you plan to save towards that?
These are questions your going to need to answer. It is impossible to budget with the idea of “just saving some money”. Focus on the numbers.
Be Realistic with Your Budget
The final tip for setting budgeting goals is to be realistic. Of course, it would be awesome to save 90% of your income, clear all your debt and have an emergency fund by next year.
Setting unrealistic goals will destroy your budget in two ways.
- It’s very easy to lose motivation when you fail to meet your monthly budget goals time after time. Go easy on yourself at the start and scale up the difficulty as you become a better budgeter.
- If you have to cut out all the fun activities you do each month just to hit your savings goal you aren’t going to be enjoying yourself and most likely stop budgeting all together. The trick is to find balance. Just because you are budget conscious and have goals to meet doesn’t mean you have to skimp out on everything like diners out and movie nights.
Related: Best budget templates and tools
How to Start Budgeting: Best Budget Tips
Now that you’re familiar with the basics let’s talk about these easy to follow budgeting tips that will help you create a monthly budget.
These crucial tips will work for you even if you’ve never budgeted a day in your life.
Track Your Income
There are two basics parts to every budget. The yin and the yang if I may. You have your income and you have your expenses. So it makes sense that the first step is to determine your income. Even if you make 6 figures a year it’s important you track all of that income.
For most people this will be in the form of a paycheck from their employer. And if you have any other source of side income be sure to include that to.
Important: When I say to track income I don’t mean your salary or your hourly rate. I mean the exact amount of cash you are seeing on your paychecks after taxes.
Read this article to learn more about the difference between pre-tax and post-tax income.
Review Your Expenses
Next you’ll need to figure out where you’re spending your money. One of the first places you can look to find this out is a bank statement.
Take some time to review this information carefully as it will tell you which categories most of your money is going into. Is it monthly subscriptions? Expensive dinners? You might even be shocked to find you’re wasting a few hundred dollars each month on things you didn’t even know about.
You’re going to want to organize these expenses somehow and here’s where you have a few options.
- Write it in a budgeting notebook
- See if your bank has an expense tracker built into the online banking
- Use free apps like Mint
Personally, I am a huge proponent of automation. That is why I enjoy using Mint and my own bank’s expense tracker. But for you folks who prefer a more physical or textile approach a budget journal is still a great option.
Now that you know how much money you make and where you’re spending it each month, it’s time to reassess and make decisions on how much of your income you’re going to allocate to each budget category.
If you remember one of my original points, you need to be realistic about amounts for each category, as everyone’s financial situation is different. In order for your budget to work you must not spend any more money in a category past what you decide here. Only until next month will you be able to spend more in that category.
Here are the recommended paycheck allocations:
Saving or Debt Repayment 10–15%
Charitable Gifts 10–15%
Introduce a Sinking Fund
When you begin allocating your budget by category you might notice you have larger expenses that don’t happen on a monthly basis. This could include Christmas gifts, life insurance, your children’s sports, doctor appointments, etc.
For these expenses it’s best that you plan ahead and break then up into a monthly expense each month.
A great example would be having to save $240 for Christmas gifts. Don’t wait until October to miraculously find $240 laying around. Instead, put aside $20 each month that year so come Christmas you’ll have more than enough to purchase those gifts.
Dealing With Overspending
It’s inevitable that along the way you’re going to have the urge to buy something that will exceed your budget.
You can very easily counteract this desire by using a cash envelope method. It’s great at helping out beginner budgeters as it will physically limit your spending.
You can also make this simple mental shift that will stop overspending and impulse buying. It works like this.
Whenever you fall into the trap of wanting to buy something cute on the shelf or snag that new video game in the moment, wait at least 24 hours to make a decision. In that time I want you to think about how many hours of work it would take you to afford that item.
If the product is truly worth it (and fits in your budget) come that 24 hour, after a good nights sleep and some deep thinking you’ll still really want to purchase it.
This is a great way to combat buyers remorse as well if you find yourself feeling that a lot.
Related: : 17 Frugal Living Tips To Save Loads of Money
Planning Regular Expenses
Once you’ve become aware of how your money is being spent you need to make a distinction between the 3 different types of expenses.
These consistent of monthly, yearly and occasional expenses.
Monthly expenses are those bills that recur each month. This could be your electric bill, phone bill, mortgage, etc. This is the easiest expense to track as your often very familiar with when they occur and how much they cost.
Yearly expenses, as the name implies are bills that occur once a year. Property taxes, or a year supply of contacts are great examples of this.
You’ll want to recall all of those yearly expenses that sometimes sneak up on you and budget for them. If property taxes are $4,800 a year then expect to budget for $400 a month to pay for that at the end of the year.
And finally we have occasional expenses. These are incredibly hard to predict compared to the other categories. This could be an $800 expense for repairing the bumper on your car.
An easy way to help cover these expense is with the use of the sink fund we mentioned earlier.
Related: $18 an Hour is How Much a Year?
Best Budget Strategies of 2021
If you want to take your budget to the next level you can incorporate some of the very popular budget strategies.
I recommend trying each one out until you find one that works best for you.
Zero-based Budget Strategy
When using a zero-based budget, every single dollar you earn gets allocated to a certain expense category, whether that be transportation or groceries.
If you end up not using all the money you assigned to a certain category it gets rolled over into a different one.
This budget strategy forces you to take time each month to create a detailed plan for your spending and savings.
50/30/20 Budget Strategy
The 50/30/20 budget strategy is quite straight forward and involves allocating your budget in 3 categories.
- 50% of your income on essentials (housing, food, bills)
- 30% of your income on personal expenses (dining out, travel, shopping)
- 20% of your income gets saved
If you decide to try this method you might find out that slightly different ratios work best for you. You can change the ratios of essential expenses and personal expenses as long as they don’t add up to more than 80% of your income.
Cash Envelope Budget Strategy
The cash envelope budget strategy is well known for it’s ability to help people crush their debt and kick bad spending habits to the curb.
Similar to the zero-based budget you will need to assign each dollar of your income to an expense category, however this time around you will be putting physical cash into labeled envelopes.
The reason this budget strategy works so well is because you physically can’t go over your budgeted amounts in a certain category as there won’t be any cash left in the envelope to use.
While confining yourself to using only cash and carrying around physical envelopes may seem old-school, studies show that doing so may actually reduce your spending.
Pay Yourself Fist Budget Strategy
The “pay yourself first” budget strategy is by far the easiest of them all due to it’s one simple rule.
In order for this method to work every time you receive a pay check, the absolute first thing you must do is pay yourself. Meaning put a set amount of money into your savings account. Then and only then can you spend the rest of your income how you choose.
There’s a lot of freedom with this budget but your accomplishing a very important part of any budget and that is putting aside a good chunk of money each month towards your savings.
If you follow this step correctly you should never again have issues saving money.
Common Budgeting Mistakes
Creating a budget is usually the easy part. Following it consistently is another story. If you’ve tried budgeting before and it wasn’t working out for you, there’s a chance you were making some common budget mistakes. Below I’ve outlined 10 reasons most people struggle with their budget.
- Not having a budget at all
- Not accounting for income tax
- Failing to save for emergencies
- Reducing your fun budget to zero
- Not updating your budget over time
- Being unrealistic
- Guessing instead of using hard numbers
- Overcomplicating your budgeting process
- Missing an infrequent expense category
- Not having clear financial goals
Budgeting Tips for Families
Saving money and managing a budget while raising a family is a huge task. One that can seem almost impossible to do right.
The average cost of raising a child born in 2015 through age 17 is $233,610
To help you out we’ve compiled a list of budgeting tips for families to get you on track.
1. Be Smart With Food Costs
If you have a family of any size you know just how expensive it can be to buy groceries. Adding some structure to your families’ eating habits, planning meals, and smart shopping can you save you thousands of dollars a year.
Trust me, you don’t have to become a coupon fanatic to make this work.
If you can plan breakfast, lunch, dinner and snacks for your whole family you’re already off to a great start. Shop for groceries once a week and try to include fresh produce.
Try to set a limit for the amount of money you are willing to spend at the grocery store each time so you don’t fall for the temptations to pick up extra stuff. If you’re struggling to have the discipline to execute this, switch to cash and only bring the exact amount of cash you intend to spend.
If you’re meal planning weekly, tailor your shopping list to what’s on sale.
You can use apps that aggregate sales flyers according to your zip code so it’s easy to find the best deals all on your phone. Take a look at what’s on sale that week and build your meals around that.
There’s also apps that allow you to take advantage of a coupon even after you’ve paid for the items.
Simply buy the products listed on the app, take a picture of the receipt and you’ll get cash back. It couldn’t be simpler.
2. Cost Effective Birthdays
Your child’s birthday can become a huge headache and take big bite out of your wallet if you let it. We highly recommend putting more of an emphasis on making memories and having fun, instead of spending money.
Some of the best birthday parties can be gamed filled birthday parties with pizza and dessert. Parties at a local beach with a stop at an ice cream parlor are sometimes all you need.
If your child has their heart set on a specific venue it can be advantageous to book in the off-season or have a joint party with another child to split the cost. Keeping a guest list small with closer friends means less planning and more money savings.
3. Try Out Secondhand Items
Buying new clothes and accessories for your children can be a huge financial mistake. Making good use of local consignment shops, thrift stores and garage sales can be a huge money saver for your family.
If online shopping is more your style check out online marketplaces and apps that ship used items right to your door. Don’t stop at just clothes, these same outlets generally offer toys, books, furniture and anything else your kid might outgrow.
If your kid is involved in sports or extracurriculars secondhand items can become your best friend. There are plenty of ecommerce sites and local stores that offer gently used sports equipment. Since you don’t know if your child is going to stick to a sport or instrument it’s best to buy used or lease until later for a more family budget friendly alternative.
After they’ve expressed a good interest in that activity you can begin to explore the option of buying better equipment.
Budgeting Tips for Students
Budgeting can be a daunting task and college students are no exception. You’re main priorities should be enjoying your college experience while still enabling a financial stability right out of university.
To help you out we’ve compiled a list of budgeting tips for students to get you on track.
1. Use Apps to Help Manage Expenses
As a student you likely have loads of expenses and loans to keep track of. And it can become very overwhelming. If you’re budget lacks structure and you’re not sure how your money is “disappearing” each month you’re in for a world of hurt.
Luckily there are a bunch of free apps that are secure and connect right to your bank account. Like clockwork each month they will let you know what categories you are spending the most in and when you’ve gone over your budget.
Using these apps consistently each month will reveal opportunities to save loads of money when you didn’t originally think it was possible.
2. Tackle High Interest Debt First
If you’ve run up credit card debt or loans the best thing you can do is make a priority list for repayment. It’s imperative you pay off high interest debt first.
I understand it might seem impossible to stop making minimum monthly payments. If you’re not in the position to double or triple your payments, then focus on one form of debt until it’s gone and then move on to the next.
This is called the debt snowball and it works by eliminating one form of debt at a time (starting with the most interest) until you eventually have none left. As you finish making payments on one loan it becomes faster and easier to pay off the others.
3. Use Your Student Discounts
You’re already a student so you might as well use all the perks available to you. And trust me, there’s more to student discounts than just cheaper movie tickets.
“For instance, with a valid student email address, you can sign up for Prime Student on Amazon and receive free shipping on millions of eligible items, exclusive college deals and promotions.” – Go Banking Rates
These student discounts even go as far as cheaper food, clothing, shipping and much more. And with any budget, the more you’re able to save on expenses the easier budgeting becomes.
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