Budgeting for Beginners: How to Take Control of Your Finances
When you finally decide to take control of your finances, reality hits you like a ton of bricks.. It’s an overwhelming task, especially if you’re just starting out. But, with the right tools and a solid mindset, creating and sticking to a budget can be relatively easy, straightforward, and ultimately very rewarding. A good budget not only helps you manage expenses, but also allows you to plan for future goals, avoid debt, and build savings. Whether you’re starting from scratch or just looking to improve your existing habits, this guide will walk you through some of the key steps to budget as a beginner.
Understand Your Income
Before you can even think of building out an effective budget, you need to know how much money you’re bringing in. This means calculating your total monthly income from all sources, such as your salary, side hustles, or any other earnings. Once you know your total income, you can allocate it across your necessary expenses and savings goals.
Quick Tip: Make sure to factor in taxes and deductions so you’re working with your net income.
List All of Your Fixed and Variable Expenses
You’ve mapped out what comes in, but what about what goes out? The next step is to list all of your expenses. These generally fall into two categories:
Fixed Expenses: These are essential costs that remain the same each month such as rent, mortgage payments, utilities, insurance, or loan payments.
Variable Expenses: These are costs that usually fluctuate, such as groceries, dining out, entertainment, or transportation.
When you track your expenses for a month or two (as a test) it’ll give you a clearer picture of where your money is going and when it’s leaving your account. BudgetWidget provides an easy way to input and track expenses with their customizable budget categories, so you can see how your spending aligns with financial goals.
Set Clear Goals
You’ll soon realize that budgeting isn’t just about covering today’s bills – it’s also about setting goals for the future. Maybe you want to save for a vacation next year. Maybe you want to put aside just enough for an emergency fund. Or maybe you want to pay off debt. Wherever it is, defining your financial goals gives you something to work toward.
It’s a better idea to break your goals down into short-term (less than a year) and long-term (more than a year) goals. Assign a dollar amount and timeline to each goal so you know exactly how much you need to save each month.
Use the 50/30/20 Rule
Some of us need a guiding light. With budgeting, we can definitely use a helping hand. A starting strategy, or popular budgeting method, is the 50/30/20 rule, which divides your income into three categories:
50% for needs (rent, utilities, and groceries)
30% for wants (dining out, entertainment, and non-essential purchases)
20% for savings and debt repayment
This framework is a helpful starting point, but you can always adjust the percentages based on your current situation. For example, if you have high debt, you might want to allocate more than 20% toward your repayments and savings.
While you can’t track your spending to a T (since we don’t ask you to risk connecting your bank account to our app), BudgetWidget allows you to build out an ideal budgeting strategy that can be exported and utilized in multiple areas.
Automate Your Savings
The best way to ensure you’re consistently saving is to automate the entire process. Life gets in the way sometimes, and with that, we forget to send some money to the savings account. Set up automatic transfers from your checking account to your savings account each payday. This helps you build savings without having to think about it. Over time, you’ll see your emergency fund or vacation coin jar grow with minimal effort.
Review and Adjust Regularly
Laying out a budget isn’t a one-time task. Your income and expenses both change sometimes, and your goals might become even bigger or smaller over time. Make a habit of reviewing your monthly budget and look for areas where you might be overspending and find ways to cut back. When you see progress, celebrate it, and adjust your budget if necessary.
Stay Motivated and Remain Accountable
Lastly, budgeting isn’t just setting up numbers on a piece of paper or on a spreadsheet every month, it also requires a certain amount of discipline. It’s easiest to remain motivated when you constantly remind yourself of your financial goals. If you find it challenging to stick to your budget, try using an app or a tool that can help you remain accountable. While BudgetWidget can offer what the best budgeting strategy might be for your current situation, we don’t yet have notifications or an AI voice that yells at you when you overspend. This is why we recommend you to get a budgeting app which can help you stay within your limits.
Takeaways
Budgeting is a tool you can leverage to gain control over the mess of the world known as finances. Whether your goals are big or small, following these steps will help you to create a budget that works for you. Start today by getting familiar with your income, your expenses, and finding a budget that works for you. For finding a budget if you have no clue where to begin, try using BudgetWidget. We require no bank connection and all of our recommendations are based on a peer comparison based on your information.
Taking the first step toward financial control might feel daunting, but remember – it’s a journey that gets easier with time. With tools like BudgetWidget by your side, you're just a few clicks away from taking charge of your financial future!
