Budgeting for Beginners: 5 Easy Steps to Get Your Budget Started Today
🕐 Read Time 5 Minutes
Creating a spending plan — also known as a budget — can help bring awareness to where your money is going each month and expedite your financial goals. It brings valuable insight into your take-home income, investing, spending, and overall financial habits — it’s the heartbeat of your finances!
But if you’ve never created a budget before and have no idea where to start, it can feel overwhelming and to be perfectly honest, not much fun. However, helping our clients create their very first budget is one of our favorite tasks because we know budgeting is the launching point of an organized and intentional financial life.
While a budget is not a cure-all for all the financial woes you may be experiencing — in fact, most Americans do have a budget and still struggle with overspending — it’s still helpful to craft and utilize.
5 Easy Steps to Get Your Budget Started Today
Grab some paper and a pen (or your trusty laptop) and get your budget started today with these simple steps:
Put your financial goals in writing.
Determine your monthly income.
Track your spending.
Craft and fund your budget categories.
Update, as needed.
Simple does not always mean quick — if you’ve never created a budget before, these steps may take multiple days or even a couple of weeks. Go easy on yourself and set a realistic timeline for completion, even moving forward a little bit will put you in a more productive financial position than you’re in today.
1. Put your financial goals in writing.
This is a crucial first step because the ultimate goal of a budget is to help you achieve your financial goals, especially when it comes to saving and investing. Some common (and realistic) financial goals include:
Build a three to six-month emergency fund.
Purchase a home.
Go to college debt-free.
Save for retirement.
Take a family vacation every year.
Your financial goals can be short (achieved in about a year), medium (achieved in two to five years), and long-term (achieved in five years or more). Remember to make your goals SMART:
Specific
Measurable
Achievable
Relevant
Time-bound
For example, a robust “save for retirement” could become: “Enroll in my company’s 401(k) this week and contribute 10% of every paycheck to the fund.” Or “take a family vacation every year” could become: “set aside $250 every month for our yearly vacation”.
Putting your financial goals in writing helps visualize what you want to accomplish and gives you some clear data and direction for your budget.
2. Determine your monthly income.
It’s crucial to know how much money you have to work with each month. Write down all the money you earn from a salary, hourly position, side hustle, rental income, and investment income — and if you share finances with a partner — include theirs too! Be sure to write down your net (after-tax) income.
If you have irregular income or only work a side hustle some months, determine your lowest, regular income amount. This helps account for lean months while still having a plan for extra income on more robust months.
3. Track your spending.
This step can feel particularly overwhelming for most first-time budgeters, and we understand! Don't expect or aim for perfection, start anywhere, small as it might seem. For one week, simply write down what you spent for the week and analyze it. Sometimes just being more aware can help you start changing behaviors.
Slowly build up to tracking your spending for an entire month! The insight you’ll gain into your spending is extremely valuable and can help you see things you have been missing (like how much you actually spend on Amazon or weekend restaurant meals).
4. Craft and fund your budget categories.
This step is arguably the most empowering because you are in the driver’s seat! You get to decide where your income goes and how much you want to spend in each budget category. Take a look at your financial goals from step one and prioritize them first.
Oftentimes, when our clients are reviewing their spending from step three, they’ll see that their spending doesn’t actually align with their financial values and goals. They may truly want to prioritize retirement and homeownership, but their spending reflects prioritizing other, smaller purchases. By crafting a budget, you can tell your money where to go each month and take practical steps to ensure you’re prioritizing your financial goals.
5. Update, as needed.
Creating a budget is not a one-time task. As your income increases, your spending habits evolve, you experience major life transitions, and your goals become more defined, you’ll need to update your budget, as necessary. Some categories, such as housing, utilities, car expenses, and groceries will always be a part of your budget, but the amount allocated to them may need to be adjusted.
If you find yourself continually going over budget in one category, consider whether you need to change your spending habits or pull funds from another category. If you’re in a season of wanting to make great strides toward your financial goals, you can look at your budget and see exactly which categories can be slashed.
Get Your Budget Started Today with Financial Fitness Coaching
Creating a budget that works for you and your family can be a game-changer for your personal finances. At Financial Fitness Coaching, we have the knowledge and experience to help our clients with budgeting, financial planning, and small business management. We offer tailored solutions for your unique financial needs, always letting your goals and desires lead our conversations.
In our 1:1 coaching, you receive monthly virtual sessions (usually between 60-75 minutes), unlimited email and Voxer access for your immediate questions, monthly action items, our personal finance mini-course, financial education in the topics you care about most, and more!
To see how we can help you, send us an email at info@financialfitnesscoaching.com or simply schedule a free 20-minute Discovery Call on our calendar.