Budgeting Tips For Beginners: 13 Best Tips To Manage Your Money

Last Updated April 13, 2024 by Davina Kelly

Do you want to learn budgeting tips for beginners? In this post, I will share the best budgeting tips to help you save money

I know that budgeting can seem confusing and overwhelming, but it doesn’t need to be complicated. You can create a simple and effective budget.

A budget is a great tool to manage your personal finances. It will help you reach your financial goals and also give your money meaningful direction.

You are going to learn simple budgeting tips for beginners to take control of your finances. If you are a young adult or student these tips will help you manage your money.

These tips have helped me to create a budget that I can stick to, pay off debt, save money and start investing in the stock market.

This post is all about budgeting tips for beginners.

Benefits Of Having a Budget

Having a budget is very beneficial in personal finance. It is essentially a plan for your money.

If you have a plan in place for your money, you are less likely to spend money on things you don’t need when you get paid.

This is because your money has direction, you know where it needs to go. You will ensure you pay your bills on time, pay off debt, save, etc.

Your budget is made in advance so it will help you to work towards long-term goals, prepare for emergencies, and can also reveal your spending habits.

Knowing your spending habits is important as you could be overspending in areas and not be aware of it.

Once you become aware you can put things in place to cut back and use the money in other areas.

I know it can seem overwhelming at first but don’t worry you can simplify it. It doesn’t need to be complex, you can create a simple effective budget for yourself that you can stick to.

Best Budgeting Tips for Beginners:

1. Get To Know Your Current Financial Position

Having a clear understanding of your current financial position is very important to know before you start budgeting.

Knowing this will highlight the key areas you are doing well in and show you where you need to improve.

Think about it and be honest with yourself. Are you struggling to pay off debt? Are you living paycheck to paycheck? Do you have any savings for emergencies?

If you are living paycheck to paycheck, for example, you need to understand why and include a solution in your budget. For example, if it is because you are overspending on takeaways you can create a small allowance for takeaways as part of your budget, cook more at home, and put the extra money into a savings account.

You don’t need to completely cut things out, you can find alternatives or cut back where you can.

2. Decide On Your Why

Once you have an understanding of your financial position you need to get clear on why you want to create a budget.

This may sound obvious, but knowing your why will help you to keep going when it gets tough.

There are many reasons people want to create a budget for their finances. For some, it could simply be to organise their finances and pay their bills on time. Or it could be to reach a goal like saving for a property. Think about this and keep it in mind. I just read this quote in Atomic Habits that seems fitting “He who has a why to live for can bear almost any how.”

3. Set Specific Goals

An important tip when budgeting as a beginner is to set specific goals. You want to have long-term and short-term goals and know the actions you need to take to reach your goals.

A short-term goal could be to pay off $10k debt by the end of the year. The action would then be to repay $833.33 towards debt each month. A long-term goal could be to save $30k in 2 years to purchase a property. The action would then be to save $1,250.00 each month.

Assigning a deadline to your goals makes them more meaningful and gives you a sense of urgency in a way. Having a clear understanding of the action you need to take to reach your goal makes it easier as it takes the guesswork out. The plan is laid out for you, all you need to do is act on it and you are more likely to reach your goal.

For example, if your goal was just to save $10k that isn’t specific nor is there a deadline. This will make you have a more relaxed approach and not make it a priority.

Having specific goals will shape your budget and also keep you motivated to keep going.

4. Track Your Income and Expenses

The most important factor in your budget is your income. The amount of money you have coming in will determine how much you can allocate to the expense categories in your budget.

You should track how much income you are expecting and how often. For example, are you paid weekly or monthly? Make a note of the dates and the amounts you are expecting.

Tracking your income and expenses is a major key when you are creating a budget as a beginner. This is because you may be overspending in areas and not realise it.

Before I started tracking my expenses I didn’t realise I was spending $80 a month on takeaways! That is embarrassing lol but I wanted to share it.

I didn’t realise I was spending so much because I wasn’t tracking my spending each month.

Once I realised this I made improvements. I gave myself a reasonable allowance to spend on takeaways and saved the extra money.

This is the power of having a budget. It can identify any problem areas which you can then improve. It can also encourage you to spend mindfully.

How To Track Your Income and Expenses

The easiest way to track your income and expenses is by checking your bank statements each month.

For example, on the 1st of each month, I log into my bank account online, download the statement in Excel format (use csv if Excel isn’t an option), and then update my budget tracker with the transactions.

You can also check it on your banking app, or if you still receive your bank statements in the post you can review them manually. You should do this in the easiest way for you.

This process doesn’t have to be complex, you can create a simple tracker in Excel or you can purchase a template. I have a simple template available in my shop, you can download it and start using it straight away.

Doing this for a few months will show you where your money has been going each month, once you have this information you can then make informed decisions on how to improve.

You can put your budget together and track your expenses using the free printable budget and expenses tracker I have included below.

5. Create a Plan

Using the information you have gathered in the tips above you can now create a plan.

I would recommend planning for a full year in advance, the plan should also include any one-time expenses like getting your car serviced and holidays.

Having a plan mapped out for a year will allow you to ensure that each month you are doing something to work towards reaching your goals.

The plan is where everything comes together. It should include the income you are expecting to receive each month, your bill payments, and any financial goals.

Once you have included everything in your budget plan, you should review it each month, this way can see the progress you are making.

The budget template in my shop includes a section where you can compare your actual results to your budget which is super helpful.

6. Automate Your Bills

As a beginner, you want to make sticking to your budget as easy as possible.

A great way to do this is to automate your bills. This will take the guesswork out and ensure your bills are paid on time.

For this to work you will need to be organised and know when all of your bills are due. Otherwise, it could lead to you being overdrawn and incurring fees and we don’t want those problems lol

I would recommend having all of your bills set up to be paid via direct debit on the same date each month. The date you choose is dependent on when you get paid.

For example, if you get paid on the 31st of each month, you can set up the direct debits for the 1st of every month. If you are saving a certain amount each month, you can also set this up via a standing order.

Tip: Think about the other expenses you may have that are not paid monthly and make a note of when they are due in your calendar. You can include these costs in your budget as well.

7. Be Clear On Wants vs Needs

When you are creating a budget as a beginner it is important to be clear on wants vs needs.

Differentiating the two will help you to make better decisions when it comes to spending.

Needs are essentials that you need to survive such as

Rent
Gas
Electricity
Groceries

Wants are things that would be nice to have but are not essential for survival, such as buying designer shoes and spending money on takeaways.

Spending money on needs is a priority, but I believe you should make room for wants in your budget by making a small allowance for it if that is possible.

For example, if you have been spending $100 a month on clothes in the past, you can create a $50 allowance and allocate the extra $50 to another area of your budget like saving or paying off debt.

This way you won’t feel like you are having to sacrifice all of the things you enjoy to reach your goals and you are more likely to stick to it.

8. Cut Back Where You Can

Finding areas in your budget to cut back is a great budgeting tip to save money. It is a good way to free up some extra money to use in other areas like saving or investing.

There are some easy ways to do this, here are some ideas to think about.

Cancel any subscriptions you are no longer using:

If you haven’t watched Netflix in a few months, why not cancel it and save the money?

Call service providers to see if there are any deals:

If you have cable, internet, etc you can call your provider and ask if there are any deals. Most companies want to retain their customers so if you explain that you love the service but want a cheaper option because you can’t afford it, they will most likely help you. If not, search online for price comparison sites and see if there are cheaper options

Cook at home more :

If you are like me and love eating takeaways this can be challenging lol but I’m sure by now saving this money instead will be more appealing to you. An easy way to do this is to think of all of the meals you enjoy eating and cook a homemade version. For example, if you love eating burgers and fries, you can make the burger at home. You can buy the ingredients for a fraction of the cost of the takeaway and make it yourself. You can make this process fun. You can search online for a recipe, follow the instructions and challenge yourself to make a better version.

Related:

How To Budget Groceries

How To Meal Prep on a Budget

9. Make Checking Your Finances a Habit

Once your budget is in place, you need to maintain it. I would recommend doing this biweekly at first, then reducing it to once a month once you have gotten used to it.

Checking in with your finances should be part of your monthly routine. You check your social media accounts all the time, right? So you can make time to check your finances.

If it seems daunting at first you can schedule a fun activity to do afterwards. For example, you could schedule a time to sit and check your finances and then watch your favourite TV show. That way you have a way to reward yourself afterwards. To make the process enjoyable get comfortable and make your favourite drink. You can light a candle and listen to some music to create a calm ambience. After you do this a few times it will become a habit, and you may begin to look forward to it once you start to see the progress you have made.

10. Change Your Mindset

Having the right mindset when creating a budget is super important. This can make all the difference in making the journey enjoyable or daunting.

The way you think about money will determine the way you feel about money. You want to create a positive money mindset.

This may be harder for some than others depending on your circumstances.

For example, I used to have a scarcity money mindset. So even though I was making good money I would just want to save it all just in case I lost it or something terrible happened.

This isn’t necessarily a completely bad thing, as saving money is great. But I had to learn why I felt that way and switch to having an abundant mindset and learn to see money as a tool.

Once I did this I was able to start investing my money in the stock market and put it in other places to grow as I understood that there is money in abundance, I just needed to use it in the right way.

I would encourage you to think about your money mindset and why you think about money in that way. Once you understand that you can then work towards changing it.

A great book to help with this is Rich Dad Poor Dad. This book will change the way you think about money and reconsider some of the lessons you have been taught about money.

Related: Money Mindset Quotes

11. Be Flexible

Being flexible with your budget is important, especially in the beginning. This is because it may not be smooth sailing in the beginning. You may find something that you included in your budget isn’t working as well as you thought it would.

Or you may have tried a particular budgeting method that isn’t working out well. This is okay and perfectly normal, the important thing is to learn from it, try to improve, or try something different.

12. Choose a Budget Method

There are many different budgeting methods you can use, here are some examples.

Zero-based budgeting:

Essentially where you give every dollar a purpose. You plan your money so that every dollar is allocated to a category

Pay yourself first budget :

Where you prioritise savings and debt repayment

Envelope system budget:

Intended to make your spending more disciplined

50 30 20 budget:

Where you spend 50% of your budget on essential needs, 30% on wants and save the remaining 20%.

If you choose this method I would suggest switching it and putting 30% towards saving and 20% to wants as saving is more of a priority.

If you have tried the zero-based budgeting method for example, and you find it isn’t working well for you then you can try a different method.

This is what I mean by being flexible. It is better to find a method that works well for you that you can stick to instead of trying to stick to the most popular method.

Don’t stress, just learn to be patient and give yourself grace. The fact that you want to create a budget in the first place is amazing!

13. Keep It Simple

I promise creating a budget doesn’t need to be complex, it can be very simple. All you need to do is subtract your expenses from your income and allocate the rest to your financial goals. You only need 3 categories to do this. See them below.

Income
Expenses (fixed and variable)
Savings/Investments (Financial goals)

Once you have been doing this consistently and have made improvements to make your money work in the best way for you, then you can add more to it.

In the beginning, I recommend keeping it simple and working on your priorities such as learning to manage the money you are making and paying off any consumer debt first.

Once you have mastered this you can include the bigger financial goals.

Frequently Asked Questions

What Is The Most Common Budgeting Mistakes?

When you are creating a budget as a beginner it is good to know the common mistakes people make so that you can learn from them. Here are the most common mistakes.

Not writing your budget down
Not tracking your spending
Setting unrealistic goals
Forgetting to track one-time expenses
Not planning for emergencies
Forgetting to plan for fun
Getting discouraged when your budget isn’t working

In this post, I have covered all of these topics so you will avoid making these mistakes.

What 3 Factors Affect a Budget?

The Amount Of Income You Have

As mentioned above your income is the most important part of your budget. This dictates whether you can afford to cover your expenses and achieve your goals.

In some cases, if you have tried everything possible and are unable to make your money stretch you may need to think of ways to make more money.

You can do this by getting a higher-paying job or starting a side hustle.

Your Personal Circumstances

If you have a lot of consumer debt to pay this will mean you have more money going out therefore paying off debt quickly may be a priority for you. Or if you have a family this will mean the type of expenses you have are different.

Keep this in mind when you are creating your budget, what works for one person may not work for another because your circumstances will have a big impact on your spending.

Financial Goals

If your goal is to pay off consumer debt, you may take a more aggressive approach which will mean your expenses are higher for some time. This is because you don’t want to continue to incur interest. Or if you are saving for a particular personal goal like saving for a car this will mean you will save a certain amount each month but you may want to take a more relaxed approach.

These factors will shape your budget so they are important areas to look at in detail.

What Is The 30 Day Budget Rule?

The 30 day rule is essentially where you wait for 30 days before you make any big non-essential purchases. If after 30 days you still want to make the purchase you can.

The idea is that it will help to reduce your impulse spending as you have time to think about it.

I think this is good for people who spend a lot on shopping and want to cut back.

I have shared some helpful budgeting tips for beginners. I hope you now have a good understanding of how to create your budget.