Many people who have never made a budget think of it as a complicated task. It also sounds like something that isn’t a lot of fun, let alone to follow day after day, week after week, and month after month.
After all, people who always follow a budget are never allowed to spend their hard-earned money on fun things or make spontaneous purchases. Or are they?
If you are here because you would like to learn how to budget money for beginners, you must first remember that a budget is simply a plan. A plan that allows you to stay in control of your money: to decide what you want to do with it and to do it.
Does that sound good to you? If so, here is how you can make your budget.
1. Think about your financial goals
Before you start working on your budget, ask yourself why you want a budget in the first place. Your budget will be a tool to help you achieve your financial goals, so think about what they are. And don’t just think about them: write them down.
Would you like to save money for a big vacation or so you can buy a house? Or maybe your goal is to eliminate your student loan debt or ensure you will have a great time when you retire.
The more important your goals are, the easier it will be for you to follow your budget. And if you need some help setting realistic financial goals, speak with a financial advisor for wealth management advice.
2. Write down a list of your income
Start your budget by making a list of your monthly income. Write down your paychecks and any money you expect to earn through a side hustle or freelance work.
If your income is irregular, look at how much money you earned during the last few months and write down the lowest amount in your budget.
Also, if you have a partner, get them involved if you want your budgeting to work.
3. Make a list of your expenses
Next, make a list of all your monthly expenses. This includes your rent or mortgage, your utilities, your food, your insurance, and any other fixed expenses you have.
If you want to stick to your budget, allocate a small percentage of your monthly income for fun things, whether eating out at a restaurant or buying new clothes.
4. Give a purpose to every single dollar you earn
Ideally, you should give a purpose to every single dollar you earn. This is what we call zero-based budgeting.
When you subtract your monthly expenses from your income, it should equal zero. Of course, this doesn’t mean you must spend all your monthly money. Zero-based budgeting is simply about making sure every dollar has a job to do.
This job could be paying for expenses, being donated to charity, or joining other dollars in a savings account.
5. Make saving money a priority
You must prioritize saving money to reach your goals as you learn how to budget. Before spending money on fun things, ensure a percentage of your monthly income goes into a savings account.
To make this easier, schedule a recurring transfer so the amount you want will automatically end up in your savings account. You won’t even have to think about it.
6. Don’t forget to have fun!
As mentioned, don’t forget to allocate a small amount of your hard-earned money for fun things. The truth is that even if you know your financial goals are important, you will feel miserable if you never allow yourself to spend money on things you enjoy.
You can still buy some fancy coffee. Just refrain from buying one every single day unless it’s planned in your budget.
7. Track all of your expenses
You must track your monthly expenses if you want your budget to work. Whenever you pay for something, subtract it from its budget line. This helps you stay accountable to your budget and see where your money is going in real-time.
Tracking your expenses might make you realize that your budget is unrealistic and needs to be adjusted. This is fine: it’s your budget, and you can adjust it so it works for you and your goals.
8. Make a new budget for each month
At the end of each month, you can simply copy your budget and adjust it depending on your plans. For example, if your best friend’s birthday is next month, it makes sense to allow yourself to spend more money than usual on fun things.
Remember that your budget allows you to control your money and not the opposite!