How To Budget For Beginners
Introduction
Starting a budget can feel overwhelming, especially if you’ve never done one before. I can relate as I have been there, knowing I needed to get my money under control and not quite knowing how. It was a scary position to be in if I’m honest.
You might think budgeting is only for people who already have plenty of money, but the opposite is often true. A simple budget helps you understand where your money is going and gives every pound a purpose. Once completed, a well written budget can bring a sense of calm to your life that you didn’t know you were missing. In this post we will talk about some simple steps you can take right now to help you to write your first budget.
Before you write your first budget, there are a few things that are worth putting in place. These seven simple steps will help you build a budget that works.
What we’ll cover in this post
The 7 steps to budgeting
- Decide What You’re Budgeting For
- Work out your total household income.
- List your fixed expenses.
- Understand your everyday spending.
- Add up your debts.
- Review your savings and assets.
- See where you stand before writing your budget.
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1. Decide What You’re Budgeting For
A budget without a goal rarely lasts very long. People who don’t stick to a budget often quit simply because they feel they are giving things up without gaining anything in return. A clear goal changes that feeling of self deprivation. Instead of focusing on what you can’t spend, you begin focusing on what you’re working towards.
Your goal might be:
- Building an emergency fund
- Paying off debt
- Saving for a house deposit
- Preparing for university costs
- Taking a family holiday
- Simply stopping living from payday to payday
Whatever your goal is, make it specific. Find out roughly how much it will cost and when you would like to achieve it. That gives your budget a purpose.
2. Work Out Your Total Household Income
Before you can plan your spending, you need to know exactly how much money is coming into your household. Include every regular source of income, such as:
- Wages
- Self-employed income
- Benefits
- Pension income
- Child maintenance
- Other regular payments
Don’t ignore smaller amounts. Even money that arrives only a few times a year still forms part of your annual income and should be included.
3. List Your Fixed Expenses
Fixed expenses are the bills you expect to pay every month or every year. These often include:
- Mortgage or rent
- Council tax
- Utilities
- Insurance
- Internet
- Mobile phone
- Car costs
- TV licence
- School or childcare costs
- Annual subscriptions
Gathering this information can take a little time, but once you’ve done it, you’ll have a much clearer picture of where your money is already committed.
4. Understand Your Everyday Spending
After your bills are paid, the rest of your spending often feels harder to keep track of. Think about things like:
- Food shopping
- Takeaways
- Coffee
- Clothes
- Entertainment
- Days out
- Hobbies
- Small online purchases
Many people are surprised when they start looking at these expenses. It’s not about feeling guilty. It’s simply about understanding your habits so you can make informed choices.
5. Add Up Your Debts
This can be one of the hardest parts of budgeting, but it’s also one of the most important. Write down every debt you currently owe, including:
- Credit cards
- Loans
- Car finance
- Store cards
- Buy Now Pay Later
- Money borrowed from family or friends
Don’t worry about why the debt exists. If you owe the money, include it. Having one complete list gives you a realistic starting point and helps you make better financial decisions going forward.
6. Review Your Savings and Assets
Budgeting isn’t only about what you owe. It’s also about understanding what you already have.
Make a note of:
- Savings accounts
- Emergency funds
- Investments
- Valuable items
- Cash savings
Knowing your financial position as a whole helps you make balanced decisions instead of focusing only on debt. It can also help you to realise where you have some power to make important budgeting decisions at a time when you could be feeling quite vulernable.
7. See Where You Stand
Now take a step back and look at everything together. Ask yourself:
- Is my income covering my spending?
- Am I living within my means?
- Which expenses matter most?
- What changes would make the biggest difference?
- How does this help me reach my goal?
Only now are you ready to write your first budget. Because you’ve taken the time to understand your finances first, your budget will be based on reality rather than guesswork.
Conclusion
Learning how to budget doesn’t have to be complicated. Before you worry about categories, spreadsheets or budgeting apps, spend a little time understanding your current financial situation. These seven simple steps will give you the information you need to create a budget that fits your life and helps you move towards your financial goals.
If you’d like somewhere to organise all of this information, download my free budget planner-just click here.
It includes simple worksheets to help you record your income, expenses, debts and savings so you can create your first budget with confidence.
