So, you’re ready to start budgeting… congratulations! I’m cheers-ing you right now!

All you’re going to need to do is look at what you are spending each and every month. It’s really as simply as that!

In this article I’m going to give you a step by step guide to help you along the way. No if-ands-or-buts, you’ll have all the tools you need to set up your own budget.

Having a budget ensures that you have enough money for the things you absolutely need and then let’s you choose where you want to spend the rest. This way, you can prioritize what you value in your life and spend more in those areas.

Whether you need to cut your spending to make ends meet or whether you just want to be able to spend more on what actually matters to you, budgeting is for everyone.

Right now our world is a little upside-down and you might need to set a strict budget just to make ends meet. Learning how to start budgeting might be just what you need to ease your mind and know that everything will be okay.

Follow these 8 steps and learn how to start budgeting. No fluff, just exactly what you need to know to get started.

STEP 1: Guess Your Last Month’s Spending

If you already have a budget laid out somewhere, find it and have it in front of you.

If you don’t have one set up yet, you can pull up an excel spreadsheet or grab a notebook and a pen. You can also grab a copy of my budget template.

Now what I want you to do is think back on your spending this past month and literally guess how much you spent in each different category.

Your categories might be things like:

• Rent

• Phone Bill

• Netflix

• Clothing & Shoes

• Groceries

• Eating Out

• Gym Membership

• Car (Maintenance & Gas)

• Etc. etc.

Your specific categories might be different but this is just to give you an idea. Just take a wild guess and write down what you think you spent off the top of your head.

STEP 2: Pull Up Your Previous Month’s Spending

Now what you’re going to do is login to your online banking and pull up all of your last month’s transactions. If you have something like the app ‘Mint’, you can also pull up your transactions on there.

STEP 3: Add Up What You Spent In Each Category

Okay this is the hard part but I promise you it will all be worth it.

Downloading a budgeting app is just the first step but you have also got to put in the work!

You need to actually go through each transaction to find out how you feel about where your money is going. Just downloading and using an app isn’t going to be enough change your spending habits or your money mindset right now.

Yes, we’re going to look at every single transaction. You can do this!

You can literally write down every transaction for each category and add it all up at the end. Or, just add everything up on your phone calculator or excel spreadsheet as you go.

Yes you need to include that $1 transaction fee for taking money out of the ATM. And yes you need to include the $5 you spent on takeout.

Every. Single. Transaction. Write it down.

STEP 4: Look At Your Categories

Now that you have a total of what you spent and where, take a look at the categories. How do you feel about them?

Look back at what you guessed your spending was in Step 1. How close were you?

Was there anything you completely forgot about or did not account for? Did you guess any categories perfectly?

In what categories did you spend more than you thought? In what categories did you spend less than you thought?

Right now you might need to look for the categories where you can completely cut your spending just to make ends meet. The only way to know where to save money is to know where the money is going.

STEP 5: Plan Out Next Month

Now we’re going to “budget” or “plan out our spending” or whatever you want to call it for the next month.

It’s hard right now but try your best to be realistic. Use your last month’s spending as a guide for the next month.

After you plan out the necessary expenses like your rent, subscriptions, groceries etc., this step then allows you to choose where you want to spend the rest of your money.

Here are some things to think about:

• Is there anything left over? Where do you want to spend it? Should you save it instead? Write it all down!

• Is there anything out of the ordinary happening next month you might be forgetting? A birthday you have to buy a gift for?

• Are you going to be getting a tax return? How much will you be getting and what are you going to do with it?

• Is your budget showing you that you will be spending more than you have right now? Do you need to cancel some subscriptions or call your bank/landlord/mortgage lender/internet provider to see what they can do for you during these times? You’ll never know if you don’t ask.

STEP 6: Include Savings and Investment Goals

Are you currently able to save any of the money coming in?

If you’re not in the right position to invest right now let alone save anything, that’s okay. Move on to Step 7.

If you are able to save a portion of your income right now, the most important part of this step is to transfer the money for savings and investment goals at the very beginning of the month. If you wait to transfer what’s left over at the end, I can promise you that more times than not, life will get in the way and there won’t be anything left.

STEP 7: Do This Every Single Month

This is not just a set it and forget it! Set a reminder in your phone and do this every single month. My reminder is set for the last day of every month.

STEP 8: Realize That No One Is Perfect

You need to realize that you are not perfect and that’s totally okay.

When you plan to spend $250 in a certain category and end up spending $400, do not shame yourself. All you should do is think about why you thought you were going to spend $250 in the first place and why you actually spent $400.

Were you being unrealistic with the original $250 or was there an unexpected expense due to the pandemic? Maybe you need to shift around your other categories to help you spend within your values for the next month.

Remember, once you’ve accounted for all of the expenses you need to pay for, if there is anything leftover, you get to choose where the rest of your money goes.

Final Thoughts

Learning how to start budgeting is an incredible way to take control of your spending and really be mindful with your money, especially during these tough times.

Follow these 8 steps every month and you will be well on your way to success.

P.S. Don’t forget to grab a copy of my budget template!

Disclaimer: I am not a certified financial planner or investment advisor. The ideas posted on this website are my own opinions on how I manage my personal finances. The content is specifically for educational and informational purposes and is not considered professional financial advice. Everyone’s finances work differently and you will have to do your own due diligence before making any financial decisions.

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