How to Start a Budget (When you don’t know where to start)

Just the word “budget” can have some negative connotations, and for others – who’ve never done it before – it can sound downright overwhelming. But millions of people live on a budget and their lives are better for it, so if you need help starting a budget, that’s what I’m here to do.

So where do you start when you’ve never budgeted before? How do you start a budget?

You don’t need a lot of bells and whistles, you don’t need complicated or difficult to understand, you just need simple.

You need a simple budget for beginners with instructions that will actually work for you.

OK! I’ve got that covered.

Golden piggy bank with gold coins with How to start a budget when you don't know where to start text overlay.

(This post may contain affiliate links. What does that mean to you? Well, if you click on a product and make a purchase, I may receive some compensation at NO charge to you. If you want to read the boring stuff, my full disclosure can be found here.)

What are your financial goals? To get out of debt, buy a house, a new car?

Or maybe it’s just to find a little breathing space, and stop living paycheck to paycheck or barely scraping by.

According to this report, 50% of Americans are living paycheck to paycheck and aren’t prepared for a financial emergency.

A budget can help you get ahead.

(This post may contain affiliate links. Our full disclosure can be found here.)

Creating a Simple Budget for Beginners

Getting started with a budget is easier than you think when you have the right information in front of you.

I’ve learned a few things about creating a budget and sticking to it. I figured all of this out through trial and error and a lot of life lessons that gave me good kicks in the rear when it came to money.

What I do works for me and I know it’ll work for you too!

How to Create an Easy Budget

We’re going to start with a basic budget…budgeting 101 so to say.

When you are just starting out, my suggestion is to keep it simple…don’t make it harder than it has to be.

RELATED POST: Half Payment Budget Method

It all comes down to tracking your money. There are all sorts of ways to do this, but I’m a visual and pencil and paper person so of course, I’ve created a simple budget planner for you to start with.

This is the perfect budgeting tool for beginners because it’s easy to use and it doesn’t overcomplicate anything (and it’s cute too)!

printable budget planner

Using the proper tool (a fully functioning budget planner) to track your income and expenses; you just might see you have more than you thought.

So grab your budget planner, roll up our sleeves and get to work and start your budget.

Before we start, I want to let you in on a little secret…the most important ingredient involved in budgeting is having the right mindset! If you don’t believe you can stick to a budget, you won’t. Really let that sink in!

If you say you can’t–then you won’t. Staying on track with your finances is as simple as making the decision and then following through.

You have to create your own rules and follow them.

Step 1:  Calculate your Monthly Income

To create an accurate budget, you must start by calculating your total monthly income.

This is simple if you have one job where you’re paid a salary income (no overtime).  In this instance, all you will need is your pay stubs from your previous month’s pay.

RELATED POST: How to Budget When You Are Paid Once a Month

But many people are paid hourly, collect overtime payments or have multiple sources of income from second jobs and side hustles. If you fall into that category, you’ll need to add all of that together to get a complete total of what’s coming in.

Knowing your monthly income is the foundation of your budget.

List all of your income on your handy budget planner. Include ALL sources of income. This is really important so don’t leave anything out.

If you have consistent pay this is easy, just write down your take-home pay from your paychecks. If you receive overtime, separate that onto another line and adjust monthly as needed.

Now if you’re self employed and have irregular income and are unsure of what your total will be for the month, write the minimum amount you know you’ll make. So if you make $2500-$4000 monthly on your home-based business, list your income as $2500.

This can always be adjusted.

Unless your income and your bills never change (like that will ever happen), you need to remember that your budget’s a changing document.

Step 2:  Add Up Your Expenses

Now we need to get into the “not so fun” part of budgeting — monthly expenses.

It’s nice to see how much we actually bring in each month, that’s not the case when you start adding up what’s going out. But knowing the total amount of your living expenses is a vital step in creating a basic budget.

Let’s start with listing your fixed expenses like rent/mortgage, car payment, insurance, etc. first.

Next list your other essential expenses like electricity, groceries, and gas.

Finally, list all of your non-essentials like entertainment, clothing, and subscriptions.

Don’t leave anything out. Having an actual account of your money will help you take control of your finances and help you achieve your financial goals.

If you’re struggling or want to achieve a specific financial goal, this is the perfect time to look at your expenses and decide what’s essential and non-essential spending…decide what you can actually do without.

RELATED POST: 5 Unique Ways to Save Money

Step 3:  Track Your Spending

Now it’s time to track your spending and see where all of your money is going every month.

This takes some time but you must know what you’re spending your money on.

You should track your spending for at least a month but three months will give you a more accurate picture of your habits.

Now don’t let this stop you from creating your budget. You can easily get started without this full picture and adjust when the time is right.

I’m the worst when it comes to knowing where my money is going, well that was true until I put myself on a tight spending freeze. If I had cash in my purse, in no time at all I was bewildered when I couldn’t find it.

RELATED POST: What is a Financial Fast? 

Do you ever do that? Do you mentally track your steps in your head and see what you spent your cash on?

I’ll break a larger bill and in nothing flat, it’s all gone without anything to show.

When I decided to break this habit, I had to stop carrying cash. Seriously! I still do my best to NOT carry cash and only use my debit card. It’s a lot harder to justify pulling your debit card out for a $1 drink from the convenience store than it is to break a $20… so I’ll usually pass on these types of purchases.

When you’re trying to gain control of your money and begin budgeting, you need to take a good look at where your money is going.

You might be shocked when you add up your $4.75 after lunch coffee treat and see your monthly total is $95…or better yet, $1140 for the year! WOW! That’s a chunk of change that could pay off a credit card!

There are many ways to track your spending. I’m definitely a pen and paper type of gal and kept a log of my spending. This in itself helped curb my spending habit. The thought of writing down every single purchase made me quickly rethink whether or not I needed to make purchases.

Step 4: Time To Compare

After you have your expenses and spending listed and calculated, compare that total to your total income.

Where do you stand?

Are you having a come to Jesus moment and need to drastically adjust your spending? Bless your heart! I’ve been there too and have the badge to prove it!

Hopefully, you aren’t spending more than you are bringing in. But if you are, go back to your spending and see where you have room to tighten up. You should also look at your non-essential expenses and see other ways you can cut expenses.

Another way to help is to start a side hustle. There are so many ways to make extra money that can help your financial standing. As a blogger, I happily pick up side graphic jobs to supplement my income.

There are so many opportunities for you to make a positive change financially and prepare for a brighter future.

Step 5:  What’s Your Plan?

Now that you know exactly where you stand, the next step is deciding on your plan for the next year, next five years or even the next 10. Having these plans will give you something to work towards.

Write it down. What is your financial goal or the lifestyle you want to achieve? Are you in the market for a new car? Are you just trying to build your savings account or create an emergency fund? Maybe you are hoping to buy a house or take your dream vacation.

Work at living at or below your means and these dreams will become a reality.

Knowing your financial truth will put you in a better place to plan for the future.

You can easily make a plan for the lifestyle you want without going into greater debt…and possibly finance the realistic lifestyle you WANT by using cash! (Now you know what I mean by realistic lifestyle…because my dream lifestyle is to travel about 250 days per year and we all know I can budget until the cows come home but probably won’t be able to afford that!) So let’s keep it real and in our means, but continue striving for that next step and dream!

If you follow Dave Ramsey you have probably heard him say something like – if you can’t afford to pay in cash, you actually can’t afford it. And that is what I know I am working on, affording my lifestyle without digging myself into debt.

If you are already following a budget let me know your tips in the comments…if you aren’t budgeting, I’d love to hear why not.

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