When it comes to budgeting for beginners, there are a few simple things that you should know about budgeting that will help you teach yourself how to do it. This post is meant to be a quick guide on what a budget is and how a beginner can get started.
What is a Budget?
First of all, and especially if you’re a beginner, you should know what budgeting is. Budgeting is really just tracking and forecasting your money flow. In some cases, a budget is used to allocate your income to different budget expense categories. In other cases, a budget is created to track and analyze your actual expenses. In either case, the goal of your budget is to help control your spending with the end goal of saving money.
For example, a beginner budget can be as simple as a one page notepad where you write down your expenses for the week. Or, it could be a more advanced household budget spreadsheet that compares each expense to your budget goal, and tracks your expenses month after month. The important thing to know is that no single budget is right or wrong. You can budget in whatever way works for you. Sometimes it works out best for beginners if they start simple and build a more complex budget as their skills evolve.
To highlight someone else’s viewpoint, here is an excerpt from Money Wise Dad that discusses why he thinks it’s important to begin a budget:
Making a family budget is not something many of us enjoy, but it’s an important thing to do if we want to keep control of our finances. You can use an Excel spreadsheet if you like, but there’s nothing wrong with the old-fashioned method of using pen and paper. Your main goal is to record exactly what money you’ve got coming in and going out each month.
Lots of people say that they don’t know where their money goes. Keeping a record of exactly what you are spending can help you spot where you’re wasting money and find areas where you can cut back.
When making a budget, think about two amounts:
- Planned amounts: what you think your income and expenses will be
- Actual amounts: what the income and expenses actually were
Basically, making a budget means writing down what money you have got coming in (Income) and what money you have got going out (Expenses).
You can see that he has a similar view to mine. Now, let’s look at how to make the budget.
How to Make a Beginner Budget
You can actually start budgeting with almost no help from others. To do so, simply start keeping track of your spending. That could mean carrying around a notepad or taking notes on your smartphone. Or you could simply download your bank accounts into a spreadsheet and categorize your expenses to start the process. You can usually accomplish this task in just a few minutes a day.
After you have a week or a month’s worth of spending data collected, it’s time to create your budget. You can either create a budget with your existing checking information, or you can download a free budget template and enter your information into that spreadsheet. It’s your choice, and if you like to use only pen and paper, you can also download a free printable budget worksheet.
It’s that easy! If you get stuck, please visit the many videos that we have included with our free budget templates. They are a great way for beginners to see the budgeting process in action.
Are you a beginner and have comments to add to this post? Please drop us a comment below.