Learn how to budget money with 4 simple steps. Get helpful budgeting tips, download or print a free template, and learn how to create a monthly budget today.
By managing the flow of money in and out of your wallet you can stop living paycheck to paycheck and reach more of your financial goals. Knowing how to make a budget and how to budget can help you know how to reach your financial goals and how to track your spending. It can also help you with building wealth over time when you save money and make investments.
What is a Budget?
Before you can learn how to budget and save money, you need to learn about what is a budget. What is a budget and how do you learn how to budget? A budget is a system used for financial organization.
When looking at examples of what is a budget, you'll find it can come in many shapes and forms. Some monthly budgeting systems use an envelope system while others use a budget sheet. But at the end of the day they all do the same thing and learning how to budget looks about the same. They organize and outline your income and how you spend your money so you can save money and reach your financial goals.
Knowing what is a budget, how to make a budget, and how to budget is one of the first personal finance things you should learn. Once you know what a budget is, you can more easily start practicing how to budget.
How to Budget Money
The budget meaning, or its purpose, is to help you see your financial input and output. The budget meaning is to help you stay organized and stay in control. A simple budget sheet can be just what you need to get in control of your income and how you spend your money. Learn how to budget so you can stay on top of your personal finances.
Step 1: List Income
The first thing you need to do in learning how to budget is to list out all your sources of income. This would include the paychecks from your job, but also any extra money you make from any of your side hustles. Here is also where you can decide whether you want to organize your personal finances for gross income or net income (take home pay).
Step 2: List Expenses
The next step to how to budget is after you have all your sources of income written down, you’ll want to form another list for all your fixed expenses. Fixed expenses are the expenses you have each month that don’t fluctuate in amount. Everyone’s list is going to look different depending on what expenses do and don’t apply to you, but here is an example list of some fixed expenses:
- Rent or Mortgage
- Student loans
- Credit card payments
- Streaming services like Netflix, Hulu, and Spotify
- Phone bill
- Medication you pay for each month
- Child support
- Car payments
After you’ve listed all your fixed expenses total the amount, subtract it from your monthly income, and that’s what you have left to spend on variable expenses.
Step 3: Set Up a Savings Account
The third step in how to budget is to set aside money for savings and an emergency fund. Get a savings account if you don’t have one already and set aside a portion of what’s left over after fixed expenses to a savings account and an emergencies savings account. An emergencies saving account is one way to prepare for long term personal finances.
Any amount you can afford to put away into a savings account each month will set you up for success in the long term, even if it’s only 5 to 10 dollars a month. It’s important to make budgeting plans for the long term and the short term.
Step 4: Organize Variable Expenses
The final step in how to budget is to organize variable expenses. Everyone’s list of variable expenses is going to look differently depending on what expenses do and don’t apply to you. Variable expenses are any expenses that are going to fluctuate in amount month to month or are considered more like luxury expenses than needed ones. Here are some examples of variable expenses you might need to consider:
- Eating out
- Gas and transportation
- College textbooks
Another way to accurately track your spending on variable expenses is to look at your transaction history from month to month and see:
- How much in total you were spending on variable expenses that month
- What those variable expenses were on.
Do this for a couple months back to get a more realistic idea of how you spend your money on variable expenses month to month.
In learning how to budget, organizing your variable expenses is where you have the most control over your budget. Whatever is left over after your fixed expenses and your monthly payments to your savings account is what you have to spend on all your other spending for the month.
Monthly Budget Template
Use the following monthly budget template as you learn how to budget money and how to make a budget. Starting with monthly budgeting is the best method for beginners. Once you can make a monthly budget easily, you can make a yearly budget or even a weekly budget too!
Money Budgeting Tips
Now that you know more about how to budget, you can start practicing good budgeting tips. Budgeting tips go hand in hand with good money management. A good budget is all about creating an automated inflow and outflow of your monthly funds.
Make Healthy Investments
Making investments is a great way to build your financial portfolio. The idea behind investments is that you put money into something that will give you more money in return later. This is called compounding interest and it can help your personal finances grow.
Control and Track Your Spending with a Prepaid Card
Make controlling how much you spend each month easier by using a prepaid debit card. With a prepaid card, you load money onto the card kind of like a gift card to yourself. Prepaid cards are a great way to avoid overdrafting or overspending because you can only spend what's on the card.
Create a Budget with Due Dates
Create a budget with due dates and keep track of your monthly bills more easily. All bills have a due date, and seeing this date can help you plan when you'll have less money in the month and need to spend less.
Make Budgeting Plans to Decrease Debts
Debt can be a real financial weight on your shoulders, but it can also be a necessary resource in order to get a house, a car, a college education, and much more.
Nevertheless, decreasing debts can still help alleviate some of that weight and provide more financial comfort and peace of mind. So, it’s important to budget with paying down your debts in mind.
All you really need when learning how to budget is a few lists, a calculator, and a budgeting plan. Once you know how to budget, practice using a budget and budgeting tips so that you can control your personal finances instead of your finances controlling you.