Budgeting Made Simple: A Step by Step Guide

No matter what your financial situation you need a budget. Budgeting is the financial roadmap for your life. Budgeting can be as easy or as complicated as you want to make it. Let’s jump into everything you need to know about budgeting!

budgeting 101

Budgeting Basics for Beginners

Are you a budgeting beginner? You hear people throwing around words like disposable income, cash envelope system, emergency fund, net worth and you have no idea what they are talking about?

Don’t freak out. In it’s simplest terms a budget is just knowing where your money is going. You have money coming into your bank account. As the days, weeks, and months go by (unless you are a very unique individual) that money starts flowing out.

Putting together your individualized budget puts you in the driver seat of what’s happening with your money.

How to Create a Budget : The Steps in Budget Preparation

Before we jump right into setting everything up, please know that a budget is incredibly individual and what works for some will not work for all and there are multiple different budgeting methods

Some people will use incredibly specific detailed categories. That doesn’t work for me. I kept getting frustrated and bailing on tracking expenses because I was making it too difficult for myself. Once I stopped tracking “cleaning supplies”, “paper products”, and “groceries” all separately and just name it “consumables”. I was a much happier budgeter.

Some people need those very specific categories. Some people get there through fine-tuning.

Please take this beginners budgeting step-by-step guide of what to do and figure out what works for you. The goal is to simplify the process enough that you will stick with it!

How to Make a Personal Budget in Excel

One of the absolute easiest ways to prepare to make a budget is to make a simple budgeting template in Excel. Excel is great because it allows you to:

  • Organize all your information.
  • It’s customizable
  • It’s very user-friendly
  • There are tons of Youtube tutorials for those who want to up their Excel game.
  • It’s an easy way to get a snapshot of how you’re doing.

If you’d like a free Beginning budget template of your very own, check out the one below: 

[elementor-template id=”4615″]


The first thing you need to do is figure out your income and expenses. What money do you have coming in and what money have you obligated.

Whether you get paid daily, weekly, bi-weekly, monthly– it doesn’t matter.  Write it down.


Next, just under the money you have coming in, write down what you need to pay.

Generally speaking, you will have three types of expenses: fixed, flexible and discretionary.

Fixed: Fixed expenses are just what they sound like, those are expenses that are a set amount and don’t change. An example would be your rent or mortgage payment.

Flexible expenses are ones that are necessary, occur regularly, but you have control over how much you are spending on those expenses. An example of flexible spending would be food.

Lastly, discretionary expenses. These are expenses that you choose. An example of discretionary spending would be Starbucks, pizza out with friends, a brand new purse.

Depending on your situation you will have your own variation, but write everything down. I like to order my expenses with my fixed first, then flexible and lastly discretionary. It makes it easier for me to cut things back if things are looking tight and I need a little more wiggle room.

For the flexible and discretionary, think about what you are typically spending and go with that for now.

Sample Budgeting Expenses

  • Housing: Rent/Mortgage, Property Taxes, HOA fees, Home Owners Insurance, PMI
  • Transportation: Car payment, Insurance, Gas, Maintenance, Registration fees, Parking fees, Train/Bus fare
  • Utilities: Water, Sewer, Trash, Electricity, Cable, Internet
  • Food: Groceries, Eating Out, Coffee shops
  • Clothing
  • Recreation: Movies, Books, Music, Vacation
  • Health: Health Insurances, Premiums, Medications
  • Personal Spending: Child care, Gym, Nails, Hair Cuts,
  • Savings & Debts: 401K, IRA, 529, Sinking Funds, Emergency Fund, Credit Cards, Student Loans.

Balancing your Budget

Now that you’ve got the bones of your budget outlined, it’s time to see how it all comes together. Do you have more money coming in than you have going out? If so, this is great news. If not, where is it going?

Take a hard look at your numbers. Are there areas that can be cut back? 


Chances are you have something, at the very least retirement, that you should be saving up for. If you’ve not started saving at all, I would encourage you to take a minute to think about what you want (or need) to save for.

Once you have an idea of what those things are, what time frame are you looking at for when those things will come due.

Once you know what and how much you need and when you need it, do the math on the money you need to set aside, weekly or monthly, to achieve those goals.

If you don’t prioritize saving, your money will always find somewhere else to go.

If you have not set up sinking funds you are gonna find yourself in a bit of a pickle when these irregular expenses come due, because they blow the budget for that month or worse, months!

FYI: a sinking fund is a pot of money for expenses that aren’t regularly occurring or that you know are coming and need to set aside. An example of things you would use a sinking fund for would be a new car, large medical expenses, family vacation, home repairs, etc.

If you have not set up an emergency fund, you are gonna wanna do that as soon as possible! 

beginner budget

How to Stick to a Budget

The biggest struggle most people have with a budget isn’t making one– its knowing how to stick to a budget!

Once you have your budget all mapped out, I recommend you monitor your spending for a few weeks or month, depending on how you spend.

Nothing was more eye-opening for me than when I got serious about budgeting and started adding up and categorizing all my expenses. 

All those little trips to Target or $7 stops for a quick lunch added up to quite a surprising sum, let me tell you!

I realized that what I thought I was spending and what I was actually spending were two very different numbers!

Review Your Budget Regularly

If you’ve never budgeted before, or never followed through on budgeting before, it is a constant refining process. You are going to be tweaking categories and changing allotments till you get a good handle on your financial picture. 

Inevitably something will happen– you’ll pay off a credit card, you’ll get a raise, you have a baby — and then you’ll need to rework your numbers to reflect those changes. 

If you’ve never really monitored where your money goes, it will be eye-opening.


I am not going to enter into the philosophical debate (in this post- ha!) over whether or not you should have debt. I’m just going to point out that having debt is costing you money in the way of interest. So cutting down on the amount of debt you have and doing your best not to incur more debt would be the way to go in the interest of saving yourself money. 

How Overspending Will Break Your Budget

Overspending is a common problem. So if you find yourself with an overspending problem, you are not alone!

There are many reasons why people overspend their budget.

  1. You don’t know how much money you are actually spending, or should be spending.
  2. You have emotional triggers that are tied to spending.
  3. Spending electronic money (via credit or debit cards) doesn’t feel real to you. 
  4. You don’t have an accurate idea of what you actually need. Sure I could budget $20 a week for my family of 5, but that just isn’t a realistic or possible goal!

Related posts:

Which payment type is best if you are trying to stick to a budget?

One of my favorite budgeting methods is the Envelope SystemIt helps to eliminate overspending by making the switch to cash. When the cash in a certain envelope (category) is gone– there is no more cash to be spent. If you are new to the Envelope System or are looking for more information, check it out. 

It is, in my opinion, one of the easiest ways to stay on budget. 

You may need to experiment on what works best for you. The important takeaway is to make a budget today and keep working at it!

Beginner Budgeting Steps Round Up

So, beginner budgeter here is your action plan:

  1. Write down all your income and expenses.
  2. Review past and or current spending.  This gives you an idea of how much you should be spending and if that’s different from what you currently are spending.
  3. Adjust money allotted for each category accordingly.
  4. Don’t forget your savings. Savings includes sinking and emergency funds.
  5. Work on getting rid of debt. 
  6. Make sure you continue to track expenses as you go. Otherwise, you will have no idea if you are staying on budget.
  7. Monthly Review. Make sure you sit down at least once a month to take a whole-picture look at how your money is working for you and redirect your course.  

You’ve got this!

Budgeting isn’t hard because you can’t fill out a spreadsheet. It’s hard because it requires you to be consistent and to stick to it.

But you’ve got this! You’ve already taken the first step by investigating what and how to budget.

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Kristen is the founder and content creator at Mom Managing Chaos where she teaches busy moms how to simplify and organize their life and finances. She writes about frugal living, budgeting, productivity and organization.