Beginner Budgeting Tips
Budgeting is a foundational but often overlooked money management skill. However, creating and sticking to a budget is one of the most impactful things you can do to take control of your finances.
Budgeting helps you align your spending with your values and priorities. It enables you to track your income and expenses, allocate money towards goals, reduce unnecessary costs, and make mindful spending decisions.
If you’re new to budgeting, it can seem daunting at first. However, with the following basic budgeting tips You can take control of your money:
1. Track Your Expenses
The first step is to track all of your expenses for 1-2 months. This includes essential expenses like housing, transportation, food, utilities, insurance, debts, etc.
It also includes discretionary expenses like entertainment, hobbies, shopping, etc. You can use a spreadsheet, online tool, or budgeting app to help categorize and total your expenses each month. Seeing everything laid out will help you understand your spending habits.
2. Identify Fixed vs Variable Expenses
Fixed expenses are those that stay the same each month like rent, car payments, insurance premiums, etc. Variable expenses are costs that change monthly like groceries, gas, dining out, etc.
This distinction is important because you may be able to cut down on variable costs more easily. Focus on reducing discretionary variable expenses first when looking to trim your budget.
3. Set SMART Financial Goals
With your expenses categorized, think about your short and long-term financial goals. Setting SMART goals can help be Specific, Measurable, Achievable, Relevant, and Time-bound. Examples include establishing an emergency fund, paying off credit card debt, saving for a down payment, or maxing out retirement contributions. Make sure your budget aligns with your financial priorities.
4. Find Ways to Increase Income
In addition to decreasing expenses, look for opportunities to increase your income. You could ask for a raise, find a higher-paying job, monetize a hobby, or start a side gig. Even an extra $100-200 per month can make a big difference in your budget’s bottom line. The more money you have coming in, the more you can put toward your goals.
5. Use the 50/30/20 Budgeting Method
A good basic budgeting guideline is the 50/30/20 rule: 50% of your after-tax income to needs, 30% to wants, 20% to savings/debt. Adjust percentages as needed, but this is a sensible way to allocate spending that encourages saving and allows some fun. Don’t rigorously restrict too much initially.
6. Use Cash Envelopes
If you struggle to stick to your budget categories, use cash envelopes to divide the money for fixed expenses and discretionary spending. Remove temptation and overspending by only using cash in envelopes for gas, groceries, dining out, etc. Automate bill payments and savings contributions.
7. Re-Evaluate and Adjust Monthly
Check your budget monthly to see if you need to adjust category amounts based on actual spending. Budgeting takes some trial and error. Be flexible and willing to course correctly. The goal is just to be more mindful about where your money is going. Over time budgets need tweaking as life circumstances change.
Implementing a budget takes effort upfront, but it pays off enormously in the long run. You’ll start to feel more confident and empowered. Budgeting is essential for achieving financial freedom through intentional and thoughtful spending. Follow these beginner tips to get started taking control of your money. Check out here for more money management and saving tips and guides.
1. How do I start budgeting?
First, track your expenses to see where your money is going. Then categorize spending and make a list of income, fixed expenses, variable expenses, and savings goals. Use an app or budget template to allocate money to each category.
2. What percentage should go to each category?
A good starting guide is the 50/30/20 budget: 50% to needs, 30% to wants, and 20% to debt/savings. Adjust percentages to fit your financial situation.
3. What apps are best for budgeting?
Top budgeting apps include Mint, You Need a Budget (YNAB), EveryDollar, and Personal Capital. Features like expense tracking, reporting, mobile access, and syncing make budgeting easier.
4. How often should I review my budget?
Revisit your income and expenses at least monthly, if not more frequently at first. Make adjustments as needed. Budgeting takes refinement so be prepared to adapt categories.
5. How do I stick to my budget?
Automating payments and savings helps. Use cash envelopes to limit spending temptation. Involve any family members and agree on ground rules. Build discipline through commitment.