Budgeting For Beginners: How, Where To Start?

Enjoy the Benefits of Budgeting for Beginners and Attaining Financial Goals.

In this post, “Budgeting for Beginners: Personal Budgeting – How and Where to Start,” you’ll understand how to embark on your budgeting journey to achieve your financial goals and attain financial freedom. Budgeting is not something many people want to do, especially for beginners; it can be an arduous task. However, like any other aspect of life, your financial well-being also requires a blueprint so that you can understand where you need to go and how you should allocate your income to achieve financial success. If you are new to personal budgeting, you are in the right place because, in this post, I’m going to explain how and where to start.

Let me 1st explain what budgeting means in personal finance. 

Budget means preparing a roadmap for your expenses over a fixed period. Or planning your expenses to meet certain financial goals. These financial goals could include

1. 1.  Planning an early retirement 
   2. Buying a car, 
   3. Buying a house
   4. Creating an emergency fund or buffer
   5. Paying off your loan, debt
   6.  Curbing bad expenses
   7. Achieving your financial freedom.

So tell me what are your financial goals for budgeting?

There could be two kinds of financial goals for budgeting in personal finance:

1. 1. Short-term budgeting goals: the short-term financial goals of budgeting are paying monthly rent, paying off student loans, paying insurance, etc.
   2. Long-term budgeting goals: Long-term financial goals include saving money to start a business, saving for the higher education of your children, paying off a mortgage, etc.

Now let’s discuss budgeting for beginners: ways a beginner should budget.

As mentioned above, budgeting is vital for having a financially abundant life. Budgeting for beginners means creating a financial plan to balance your expenditure according to your income in a fixed period.

You could create your budget on a weekly, monthly, and yearly basis. In general practice, people create a budget every month. You may find it a little bit boring and painful but once you enjoy the joy and freedom and mental peace that comes with budgeting you would never look back, I promise. If you ask me about my budgeting story, you would be amazed to know that I am a very considerate person when it comes to financial matters. Even in my teenage, I used to save 1st then I expend the leftover money only on needs. Because I believe in power dressing and I love to read a lot, be it personal development books or fictional drama or something else, a chunk of my savings I used to expend on these two main items. Tell me your Initial idea of budgeting in the comment section.

Okay come to the topic:

How To Create A Monthly Budget For Beginners?

1. 1. Firstly calculate your monthly income: If you are a salaried person and you have only one income source then it’s easy to calculate but in case you have multiple sources of income calculate it or you can refer to a bank statement or debit card statement to calculate. In case you are a business owner or freelancer, who doesn’t have a fixed income then calculate the average of three months’ income so that you can understand how much and where you have to expend, save, and invest.

2. 2. Write down your all fixed expenses: let’s assume your monthly income is $5000 then fixed expenses include:
      1. 1. Rent: $1100
         2. Food: $1000
         3. Utilities: $550
         4. Insurance:$ 400
         5. Cash: $400
         6. Debit: $600

3. 3. Calculate how much money is left with you: after calculating your fixed expenses, subtract fixed expenses from income let’s calculate, 

a.Rent – $1100+

b. Food – $1000+

c.Utilities – $550+

d.Insurance – $400+

e.Cash – $400+

Debt – $600= $4000.(total)

Now $5000-$4000= $1000.(left)

4. 4. Now plan your financial goal to achieve: 1st think about what is your financial goal. your financial goal could include short-term financial goals as well as long-term financial goals.

 In the short-term financial goal, you can include all day today’s expenses such as: 

• •  Monthly rent, 
  • To say buy higher interest credit cards,
  •  To pay off credit card loans,
  •  To purchase precious household items, etc.

   In long-term financial goals, you can include

• •  Budgeting for auto loans,
  •  Budgeting for owning your own home, 
  • Budgeting for a better credit score,
  • Planning for early retirement,
  • Saving to invest in stocks with high returns,
  • For creating an emergency fund to be financially secure,
  • Saving to start your own business,
  •  Budgeting for vacations, etc.

5. 5. Determine how much money you have to spend and how much you have to save when budgeting for beginners. : since you can’t change your fixed expenses you have to make room for saving in your variable expenses. In your variable expenses, there are mostly fun expenses now the question is:

What are fun expenses?

Fun expenses include your wants, not your needs, and you can easily curb these expenses to attain your financial goals. In fun expenses, there are

• •  Expenses on restaurants, 
  • Branded clothing, 
  • Shopping,
  •  Subscriptions of OTT platforms, etc.

So you can save money by budgeting your wants and lowering expenses on certain services.

6. Design your budget: After determining how much money you have to save and expense now it’s high time to design your budget. While designing keep in mind the ratio of needs, wants, and savings. Most of financial experts advise to follow the 50/30/20 method of budgeting. In this method, you have to spend 50% of your income on your needs, 30% on wants, and 20% on savings to pay off debt or invest. By using this method you can easily manage your budget and financial plan.

7.  Keep tracking your budget: just making a plan and executing it is not enough. You also have to keep track so that you can measure your progress and if required you can change it for good. To track your budget although there are many financial tools available, you can also easily track with Excel sheets as I do. In case you are not able to achieve your budgeting goals, change your budget or make required changes.

Things to remember while budgeting for beginners: 

1. 1. Set real goals while personal budgeting: while budgeting for the 1st time what most people do is they set unrealistic goals, which they later find difficult to follow and lose motivation.
   2. Consider your income and expenses and classify them as need and want: then try to curb want so that you can achieve your budgeting goals.
   3. Make room for seasonal expenses: seasonal expenses include expenses due to changes in weather or season for example in summer you need an air conditioner and cooler due to usage of these appliances you have to pay extra bucks for electricity bills. In winter, there is also a need to change your eating habits, your clothing style change, and your financial needs.
   4. Not just plan your budget for beginners but also act on this or put it into action: planning or designing a budget on paper is easy but putting it into action is more important so that you can achieve your budgeting goals along with your other financial goals.
   5. Keep it simple: because you are a beginner in budgeting, keeping it simple would work for you. And the reason is it would be easy for you to execute it as planned.

Why is it important to budget?

There are several benefits of budgeting for beginners, 

• • You could be able to pay off all your debt even if you don’t have a big payslip or a big source of monthly income.
  • With budgeting comes financial discipline which rewards you with a better lifestyle financial well-being and ultimately peace of mind.
  • You save yourself from unnecessary spending and save more to meet your financial requirements.
  • Budgeting gives you a sense of satisfaction when you track your financial goals and achieve them.
  • Budgeting gives you the power to better budget your finances.
  • Budgeting keeps you hooked to achieve your financial goals.

To sum up :

    When it comes to budgeting for beginners: how, where to start? Always go with the simplest and easy-to-execute methods as mentioned above. Because with complicated methods of budgeting, there is a possibility that you could lose your interest in it or find it difficult to execute. With budgeting comes financial freedom and mental peace.

Hope you find it helpful please subscribe & share with someone who is just planning to start budgeting. Stay tuned for more…

                          Thank you