How To Budget Your Money (For Beginners)

May 16, 2019 | Budgeting | 6 comments

Updated On June 8, 2020

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I saw a crazy statistic the other day:

78% of Americans recently reported that they live paycheck to paycheck

That’s over 255 million freaking people!

But, here’s the kicker:

When you learn how to budget your money, you can remove yourself from this statistic.

Even if you don’t live paycheck to paycheck, budgeting is necessary for everybody.

Because here’s the deal:

If you want to pay down debt, save more cash, and/or be more responsible with your money, you need to know how to budget your money.

Budgeting your money doesn’t have to be hard or scary, simply follow these steps to get started:

  1. Establish Your Why
  2. Gather Your Financial Information
  3. Calculate Your Income + Expenses
  4. Cut Costs
  5. Choose A Budgeting Method
  6. Track Your Budget

Keep reading to dive in.

1.  ESTABLISH YOUR WHY

The first thing you must do on your budgeting journey is to establish your why.

Establishing your why is simple.  Just ask yourself these questions:

  1. What will budgeting help me do?
  2. How will budgeting make my life simpler?

For example, you might want to start budgeting to stop living paycheck to paycheck, to pay off debt, or to save more money.

Knowing your why is helpful because it creates meaning for your purpose.  Without it, you’d have no motivation to continue budgeting.

Now:

Once you establish the reason you want to start budgeting, I urge you to write it down!

Why?  Because writing it down makes it real and it reminds you of why you started in the first place (if/when budgeting gets tough).

Hint:  Need a spot to write down your motivation for budgeting?  I highly recommend investing in a budgeting planner, like the Budget Boss Binder to keep all your financial information in one spot.  (Our budget binder includes 40+ printables and templates to budget better, pay off debt, save money, and more.  Check it out here!)

2.  GATHER YOUR FINANCIAL INFORMATION

Want to know the best part about this step:

It’s hella simple and shouldn’t take you much time at all.

You’re simply going to gather up your financial information. (i.e., pay stubs and bills)

You’ll want at least a months worth of pay stubs and all of the bills that you currently pay.

This is crazy, but:

Most people don’t actually know how much money they make or how much money they spend.

And, when you don’t know this information, it is impossible to budget.

So, to avoid playing guessing games, take the time to gather your financial information before you try to create a budget.

Hint:  If you are unsure of your exact income and expenses, track your finances in a budgeting binder for 30 days to get a clear picture.

3.  CALCULATE YOUR INCOME & EXPENSES

Ok, now that you have all your financial information in one handy place, it’s time to organize that information in preparation for creating a budget.

It’s simple:

Take all the information you gathered for step two and write it down on a piece of paper or in your budgeting planner.

It should look a little something like this:

Income –

  • Jack: $2,300/month
  • Jill: $1,800/month
  • Total = $4,100

Expenses –

  • Rent (fixed) – $900
  • Car Insurance (fixed) – $80
  • Credit Cards (fixed) – $250
  • Utilities (fixed) – $150
  • Cell Phones (fixed) – $100
  • Groceries (variable) – $500
  • Other (variable) – $100
  • Total = $2,080

* Splitting up your expenses into two categories – fixed and variable – is very helpful for most budgets.

Writing down your income and expenses is a necessary step before you can create a successful budget.

Why?

Because, once you have this information in front of you, you can:

1.  Determine how much money you’re working with (your income)

2.  See which items need to be included in your budget (like fixed expenses such as rent)

3.  See which expenses can be reduced, if necessary, from your budget (like a utility bill)

4.  Determine where you overspend (on things like coffee)

5.  Determine what you need to add to your budget (like extra credit card payments)

If you’re like me and don’t trust yourself to not lose a random piece of paper with all your financial information on it,  our budget boss binder includes a yearly income and expense evaluation worksheet!

Alrighty.  Now we can finally start budgeting!

4.  CUT COSTS

Once you’ve calculated your monthly income and expenses, you can quickly decipher if you’re living within or above your means.

To do this, simply subtract your total expenses from your total income.

If the number is a positive number:

You’re in the green and should be able to afford your lifestyle with ease each month.  If you’re struggling to pay your bills, it is because you aren’t currently budgeting correctly.

If the number you calculated is a negative number:

You’re in the red and cannot afford your current lifestyle, meaning you will have to decrease your expenses if you want to stop living paycheck to paycheck.

Regardless of whether you are in the red or not, cutting costs will benefit you immensely.

These are the best resources to use to dramatically decrease your monthly expenses:

Truebill is a fantastic resource that will help you lower your monthly expenses by as much as 80%!  Once connected to your bank account, Truebill will analyze your accounts to cancel unused subscriptions, lower your monthly bills, and reach your savings goals.  Click the button below to get started with Truebill for free!

  • Pay off your debt

Credit card debt will suck you dry every month if you don’t work hard now to pay off what you owe.  That’s why I recommend consolidating your credit card debt into a low-interest personal loan to save tons of money and pay off your debt in half the time. (Doing this helped me pay off $15,000 in debt in only 12 months!)

You’ll also want to check out our post on the 4 best ways to pay off debt to help you create a debt pay-off plan that will actually work!

  • Live Frugally

Did you know that you’re probably wasting hundreds of dollars a month on things you don’t need?  By adopting a frugal lifestyle, we were able to save over $800 every single month.  Use the tips in this post to start living frugally and cut your monthly expenses in half.

Read Next…
Who knew saving tons of money could be so simple?

Furthermore, who knew you were missing tons of opportunities to save money while buying the things you already do?

5.  CHOOSE A BUDGETING METHOD

It’s time to get down to business.  Budgeting business ;)

To start budgeting, you’ll want to research and choose a budgeting method that works for you.

These are the ones that I recommend exploring:

  • ZERO-BASED BUDGET

Simply put, a zero-based budget holds you accountable for every dollar you earn.  This does not mean that you’ve spent every last dime by the end of the month.  It simply means that you have assigned every dime of your income a job.

For example, you would assign a monetary amount to all of your expenses, to your debt repayment, to your savings accounts, and more.

Then, at the end of the month, all of your money has either been spent on expenses or put into a designated bank account.

A zero-based budget is great for people who live paycheck to paycheck and want to eliminate overspending and waste from their budget.

To learn more about the zero-based budget read our ultimate guide!

  • 50/30/20 BUDGET
This budget is simple and concise.  The premise is that you allocate 50% of your income to your needs, 30% to your wants, and 20% to savings and debt repayment.

This budget is perfect for people who aren’t living paycheck to paycheck but want to be more responsible with their money.

To learn more about the 50/30/20 budgeting method, check out this post!

  • AUTOMATED BUDGETING METHOD
The Automated Budgeting Method is the system I use and love for my family.

I like to think of it as a mix between the zero-based budget and the 50/30/20 budget – with automation!

First, you figure out what percent of your income you need for your expenses.  Then, with what’s leftover, you assign percentages of your income to savings, debt repayment, etc.

Finally, to automate your budget, use direct deposit to put exact percentages of your income into designated bank accounts for your expenses, savings, debt repayment, etc.  Then, simply put all of your bills on autopay.

This budgeting method might take a little time to set up, but once it is in place, you never have to budget again until your income or expenses drastically change.  It is a lifesaver!

To see a complete overview of The Automated Budgeting Method, read this post!

If none of these budgeting methods seem like a good fit for you, don’t worry.

There are tons of budgeting methods out there and when all else fails, you can simply make your own.

Bottom line:

Create a budget using a budgeting method that works for you and your lifestyle.

Automated Budgeting Monthly Template + Checklist (2 Pages)

$1.00

Zero Based Budget Monthly Template + Checklist (2 Pages)

$1.00

50/30/20 Monthly Budget Template + Checklist (2 Pages)

$1.00

6.  TRACK YOUR BUDGET

Here’s the deal:

Your budget will never work if you do not track it.

Why?

Because if you do not track your finances (or your flow of income and expenses), you have no way to know if you’re sticking to your budget.

It’s easy though:

We’ve created a 40+ page budget binder that includes every printable and template you will ever need to organize your finances, create a budget, track your spending and bill pay, pay off debt, save money, create (and accomplish) financial goals, and more.

Oh, and it gets better:

Our Budget Boss Binder is undated so you can use it year after year to ensure that you are able to afford the life of your dreams.  And, with every update to the Budget Boss Binder, you’ll receive a free copy – straight to your inbox.

And, that’s not all:

For readers of this post, we’re offering the Budget Boss Binder for 50% off!  Yep, for a $9 investment, you can ensure your financial success for the rest of your life.

Remember:

When you track your budget, you ensure that the system you put into place is working correctly.

Don’t let the time you spent creating a budget go to waste by avoiding this simple step!

…Skip to the bottom?

Did you skip to the bottom?  It’s cool, most of us do.  ;)

To sum it up, if you want to learn how to budget your money for a life of financial success, follow these steps:

1.  Establish Your Why – Define exactly why you want to or need to start budgeting.  Without this, you’ll have no motivation to continue budgeting. (I.e., because you want to pay down debt, save more money, or stop careless spending)

2.  Gather Your Financial Information – Take the time to collect recent paystubs and all of the bills that you pay.  Do not skip this step and play guessing games; your budget will not be successful this way.

3.  Calculate Your Income + Expenses – Take the information you gathered in step two and calculate your total monthly income and your total monthly expenses. Organize this information on a blank sheet of paper, or invest in a budgeting planner and use a template.

4.  Cut Costs – Use services like Truebill and Trim to analyze your spending and help you decrease your bills and get rid of unnecessary expenses.  Also, pay off debt and live frugally to dramatically decrease your monthly expenses.

5.  Choose A Budgeting MethodResearch different budgeting methods like The Zero-Based Budget, The 50/30/20 Budgeting Method, or The Automated Budget System.  Then, choose a system that works best for your lifestyle.  Finally, create your budget.

6.  Track Your Budget – Don’t let the time you spent creating a budget go to waste by not tracking your budget.  Tracking your budget ensures that you are sticking to your budget and that your budget is still working for your lifestyle.  You can easily track your budget by investing in a budgeting planner, like the Budget Boss Binder from Who Says What.

The bottom line?

Creating a budget is necessary for anybody who has an income and pays bills.

take action!

Now that you’ve got all the juicy details on how to budget your money for beginners, it’s time to take action:

1.  Sign up for our FREE Budget Boss eCourse to have each step emailed to you with detailed action points for 5 days (by the end you’ll have a budget you love!)

2.  Invest in a budgeting planner, like the Budget Boss Binder, to track the budget you worked so hard to create.

Now:

I hope we helped you learn how to budget your money better so you can afford the life of your dreams!

Don’t forget to sign up for our free resource library of budgeting goodies below.

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HAPPY BUDGETING!

– Michelle

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