We partner with companies we love and use. Read our disclosure policy for more info.
If you’ve heard it once, you’ve heard it a hundred times: budget your money.
This is the one thing that all financial experts agree on. And that’s why we’ve decided to make this budgeting for beginners guide.
This is your first step to winning with money.
But here’s the deal:
If the key to winning financially is living with your means, then you have to know your numbers.
Yet according to a recent study, almost 60% of people admit to not using a budget. This means six out of ten people aren’t keeping track of their finances. Easy come, easy go, right? Well, not exactly.
Have you ever looked at your credit card bill and wondered: Why is this so high? What on earth did I buy? It’s easy to overspend when you aren’t sure what you have budgeted to spend.
So why should I budget?

If budgeting is the most effective way to manage and save money, why aren’t more people doing it?
According to the New York Post, most people are clueless when it comes to personal finance. The truth is, there are several things we know we should do, but actually doing it is another story.
Knowledge is not the problem, execution is.
But for you, it’s different. And that’s why you’re here.
You’re determined to create a plan for your money. And because of it, you’ll reach your financial goals.
1) You’ll Be Keeping Your Eye on the Prize
Your budget is your road map to financial success.
And since that’s true, then there’s nothing more important that I can tell you than this:
You can’t drift aimlessly through life, tossing your hard earned dollars at every shiny object that catches your attention.
How would you ever save money that way?
So your budget is your plan for all the major milestones in your life:
Buying a home, getting out of debt, planning for retirement, and so on.
These are the things I’m going to constantly remind you of in this budgeting for beginners guide.
I don’t want you to lose sight of them.
2) It’ll Prevent Lifestyle Creep
I earn good money, I work hard, so I deserve it.
Or at least, that’s what we tell ourselves. It’s that “I deserve it” or “I can make the monthly payments” mindset that leads us to lifestyle creep. Lifestyle creep means when your income goes up, your expenses rise to match it.
It’s like putting your financial goals on a treadmill – where you’ll never get any closer to reaching them.
3) It Sheds Light on Bad Spending Habits
You know what they say, knowledge is power. Budgeting will show you how much eating out is really costing you.
You might notice that you’re spending money on things you don’t need.
Do you need to pay $100 extra a month for 500 channels when you could switch to Amazon Instant Video instead? Is that daily frappe worth spending $5 each day on?
When you budget, you’ll start to rethink your spending habits and become more financially savvy because of it.
4) It’ll Help You Prepare for Emergencies
Shit happens. But that’s what your emergency fund is for. Life is filled with unexpected surprises. Some better than others.
The money you’ve budgeted will help protect you from the inevitable.
Nobody wants a single disaster to send them into debt that they’ll have to carry around for months or years.
Where to start

Since this is about budgeting for beginners, I want you to start by doing this:
1) Write Down Your Expenses
Your first order of business is to figure out exactly how much you’re spending each month. Go through your bank statements and receipts.
Don’t forget both variable and fixed expenses.
2 ) Write Down Your Income
If you have a steady income, then this step should be easy.
If your income is irregular, this step will be based on an estimate. You’ll need to look over your pay stubs or direct deposits from the last year to find the lowest one in the bunch.
You should base your budget on your lowest monthly estimate. If this is your first time living on a variable income, then just estimate what your lowest month will look like.
3) Set Financial Goals
Several years ago, Forbes did a research study about goal-setting at Harvard University. They asked students if they had set specific, written goals, as well as if they’d made clear plans to achieve them.
After 10 years, the same group of students was interviewed again.
The results were surprising:
The 13% of the class who had goals, but didn’t write them down, earned twice the amount of the 84% who had no goals.
And the 3% who had written goals were earning, on average, 10 times MORE than the other 97% of the class combined.
This is an example of how goal setting will transform your life.
Do you want to be debt free?
Do you want to buy a home?
Would you like to go back to school?
How much would you like to have saved for retirement?
You have to know what matters to you.
Once you’ve moved past those three steps, the next step in this budgeting for beginners guide is to pick a method.
4 Budgeting Methods

We’re going to cover how to make a monthly budget using the four most common methods.
Zero Based Budget
Zero-based budgeting has been around for a long time.
And with the help of financial experts like Dave Ramsey, it’s become more popular.
The concept behind zero-based budgeting is simple:
You give every dollar a job.
Have $50 leftover after you’ve covered your expenses? Allocate it somewhere.
Savings, fun money, retirement – it doesn’t matter. Just make sure to assign it to a category. According to many financial experts, “money without a job” will get spent – often carelessly.
“If you cover all your expenses during the month and have $500 left over, you aren’t done with the budget yet. You must tell that 500 bucks where to go. If you don’t, you lose the chance to make it work for you in getting out of debt, saving for an emergency, investing, paying off the house, or growing wealth.”
And here’s a zero-based budget in action:

50/30/20 Budget
This is a no fuss method for people on a steady income.
The idea here is straightforward:
You divide your take-home pay into three categories: needs, wants, and savings.
– Budget 50% for needs.
– Budget 30% for wants.
– Budget 20% for saving and investing.
Needs
Needs are the bills you absolutely must pay for survival. These include shelter, transportation, food, clothing, and healthcare.
Wants
Wants are all the extras you spend money on that make life more enjoyable. Eating out, movies, vacations, and cable.
Savings
This includes money going into an emergency fund and investments.

Reverse Budget
The reverse budget is also called the backwards budget. It can be done on any income – both fixed and variable.
This makes it a perfect option to include in this budgeting for beginners guide.
The concept behind reverse budgeting is to pay yourself first.
But don’t get too excited. Paying yourself first doesn’t mean you go out and splurge.
Instead, it puts an emphasis on prioritizing saving and investing.
Here’s how it works:
You determine a set amount to save each paycheck. That could be 20%, 30% or whatever amount is reasonable for you.
Once you’ve paid yourself first, then you pay for necessities like shelter and food.
Finally, the money left over is your spending money. Since everything else is handled, you can use the rest how you like.

Half Payment Budget
The half payment budget is where you take your bills and divide them in half. Each payday, you’d set aside half of the bill amount.
This budgeting method is great for people who get paid biweekly.
Why? Because the problem with monthly bills is that they aren’t spread evenly throughout the month. This usually leaves one half of the month with more due dates than the other.
And that can blow your budget.

Which budgeting method do we recommend?
I get this question a lot.
While I see the benefits in all four methods, the zero-based budget is our tried and true. It’s the most simple, straightforward, and gives you the most control over your money.
Assigning every dollar a job helps you make smarter financial decisions.
But personal finance is personal. So I encourage you to try different ones to find the best one for you.
So now that you’re familiar with the four budgeting methods, it’s time to address the elephant in the room:
Creating a budget is the easy part, but sticking to it is another story.
We all start off with the best intentions:
We’re going to save money, pay off debt, and only buy what we need.
Well, you already know what happens, right? Your budget goes out the window.
Budgeting is just like any other skill. It gets easier with time and practice.
So if you’ve found yourself falling off the wagon, don’t beat yourself up. We’re all about budgets made easy. So check out these tips for staying on a budget.
And know that what you’re doing is bringing you one step closer to your financial goals.