How to Budget: Simple Tips for Beginners

Learning how to budget: it's important to know what a budget is, and what it is not.

Learning How to Budget

So, you’re thinking it’s time to get on a budget? I think that’s a fantastic idea! You seem pretty smart. Whether you’ve never done one before, or you’re getting back into it, you could use some simple tips on how to budget. I’m here to help.

What a Budget Is

First, it’s important to understand what a budget is. A budget is simply a plan of action. You are deciding ahead of time where your money should go so that you’re prepared for anything.

Wouldn’t it be nice to have some funds sitting around for when, say, a tire needs replaced? Your budget lets you do that. By telling your money to go to savings, you now don’t have to stress when basic maintenance needs come up.

A budget translates into peace of mind and accomplished financial goals. Doesn’t that sound nice?

What a Budget is Not

A budget is not a way to not have any more fun. You’re not taking away everything you love when you get on a budget – you’re simply making sure the necessities are in place first, and then giving yourself permission to have fun. When you do it this way, you won’t feel guilty about spending money on yourself, which only increases your enjoyment!

A budget is also not a pre-set template that looks the exact same every month. If you haven’t been able to successfully budget for more than a couple months, this is probably why. Your life is different each month, so your budget should be, too. Remember, it’s not a restriction – it’s a plan!

Learning how to budget: it's important to know what a budget is, and what it is not.
A budget should be your friend, not your enemy!

The Biggest Rule

The most important thing to keep in mind when budgeting is the number zero. That’s the number we’re aiming for when budgeting. I know, “zero” doesn’t sound good when we’re talking about money, but in this case, it is – trust me.

You want to create what is called a “zero-based budget.” That’s a fancy way of saying that you’re budgeting every single dollar that comes into your hand. Yes, even on months where your income is irregular, and yes, even when you get a bonus. Make sure you tell your money to go, because it has a funny way of going missing if you don’t.

How to Budget: The Basics

So, how do you get started? Let’s recap what we’ve said so far and then add a little to it.

  1. Your budget is simply your plan for the month.
  2. Just like your life is unique each month, your budget should be, too.
  3. Your budget should account not just for your needs, but also your wants.
  4. And finally, there should be exactly $0 left out of the budget.

Now, we know our basic rules of how to budget. Feels a little easier to get started when we lay it out right in front of us, right? (By the way, that’s why we budget. Life is easier, too, when everything is laid out right in front of you!)

The first step is to list all your income for the month. Next, list out your minimum required expenses, item by item. This is your tithe, mortgage/rent, debt minimums, groceries, transportation – the minimum for each expense that is an absolute necessity. Finally, subtract those expenses from your income, and now you’re left (hopefully) with some more money to put toward your wants and goals.

Using What’s Left

Hopefully you have some money left to assign after taking out your basic expenses. Now is the time to decide what’s important to you and assign money according to that order. Take some time to think about what’s most important, right now: Building your emergency fund, getting out of debt, charity, whatever it is, just make the decision and change the priority as your circumstances evolve.

This may mean cutting back on certain expenses for a while, or potentially selling some things you can’t afford now that you’ve seen how much goes out each month. I’m talking about your nonessential expenses now, what you’re spending on top of the bare minumum you found out above. Talk to a coach if you need help deciding what to do now that you’ve laid out your income and expenses.

There is definitely an order that is suggested for your priorities, but right now that’s not important. For now it’s enough that you’re thinking about what matters to you, and you’re creating a budget to help you hit your goals.

Financial coaching expert Cameron

What if you don’t have any left after subtracting minimum needed payments from income? Then you need to do some serious thinking, and some serious acting, and fast. You can’t sustain guaranteed loss every month for very long. We’ll talk more about that in another article. I would highly suggest meeting with a financial coach, like me, to figure out the quickest way to turn that negative into a positive. It’s our specialty as coaches.

It Takes a Little Time to Learn How to Budget

One last tip for you as you learn how to budget: Give yourself some time to learn the skill. Budgeting is a learned skill, just like any other skill. Your first couple of times won’t be perfect, and that’s okay. What matters is that you’re moving in the right direction. Learn from your mistakes each month and get better over time.

Plus, more tips and guides on how to budget (and more on personal finance in general) will be in the Personal Finance section of the Living in Focus blog. Accelerate your learning there!

If you want a more personal experience as you learn how to make a budget, let me help you! Book a consultation for no charge or buy a session today!

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