by Step-by-Step Budgeting for Absolute Beginners
Introduction
Budgeting is the foundation of financial stability. Whether you’re looking to save money, manage expenses, or achieve financial freedom, a budget helps you take control of your money. This beginner-friendly guide will walk you through the budgeting process step by step, with templates, visuals, and real-life examples to make it easy to understand.
Does the word “budgeting” make you nervous? You’re not alone! Many people avoid budgeting because it feels complicated or restrictive. But here’s the truth: a budget is just a plan for your money—and everyone needs one. Whether you’re saving for a vacation, paying off debt, or just trying to avoid overspending, this guide will walk you through budgeting in simple, bite-sized steps. Let’s dive in!
Step 1: Understand Why Budgeting is Your Superpower
Before diving into numbers, let’s understand why budgeting matters:
- Helps track income and expenses
- Prevents overspending and debt
- Builds savings and emergency funds
- Ensures financial peace of mind
- Helps achieve financial goals (vacations, investments, buying a home, etc.)
Example:
Without a budget, Sarah, a young professional, spends without tracking. At the end of the month, she’s left wondering where her money went. After setting up a budget, she realizes she can cut unnecessary subscriptions and save ₹5,000 monthly.
Step 2: Calculate/Track Your Income
Make a list of all your income sources:
- Salary (after tax deductions)
- Freelance income
- Side hustles
- Rental income
- Any other earnings
💡 Tip: If your income fluctuates, take an average of the last 3–6 months.
Step 3: List All Your Expenses
Categorize your expenses to get a clear picture of where your money goes:
Fixed Expenses (Essential & Recurring)
- Rent/Mortgage
- Loan EMIs
- Utility Bills (Electricity, Water, Internet)
- Insurance (Health, Life, Car)
- Grocery and Household Essentials
Variable Expenses (Can Change Monthly)
- Eating Out
- Shopping
- Travel & Entertainment
- Subscription Services
- Gifts & Donations
Irregular Expenses (Occasional but Important)
- Car Repairs
- Medical Expenses
- Festivals & Special Occasions
💡 Tip: Review your last 3 months’ bank and credit card statements to track spending patterns.
Step 4: Choose a Budgeting Method
Pick a budgeting method that suits your lifestyle:
1. 50/30/20 Rule (Best for Beginners)
- 50% Needs (Rent, Food, Bills)
- 30% Wants (Dining Out, Shopping, Fun)
- 20% Savings (Investments, Emergency Fund, Debt Repayment)
2. Zero-Based Budget (Every Rupee Has a Job)
- Assign every rupee to a category (income – expenses = zero)
3. Envelope System (For Cash Users)
- Allocate cash into envelopes for each spending category
Example:
Amit earns ₹50,000 per month. Using the 50/30/20 rule:
- ₹25,000 for Needs
- ₹15,000 for Wants
- ₹10,000 for Savings & Debt Repayment
Step 5: Track & Adjust Your Budget
Use tools to track spending:
- Apps: Walnut, Money Manager, PocketGuard or Any Budgeting App
- Spreadsheets: Google Sheets, Excel
- Traditional Method: Notebook & Pen
💡 Tip: Review your budget monthly and adjust as needed.
Step 6: Build an Emergency Fund & Save for Goals
- Start with at least 3-6 months’ worth of expenses as an emergency fund.
- Set SMART financial goals (Specific, Measurable, Achievable, Relevant, Time-bound).
Helpful Tips for Beginner Budgeting:
- Use a Budgeting App: Apps like Mint, YNAB (You Need A Budget), and Spreadsheet.
- The 50/30/20 Rule: Allocate 50% of your income to needs, 30% to wants, and 20% to savings.
- Start Small: Don’t try to change everything at once. Focus on one or two areas to improve.
- Be Patient: It takes time to build good budgeting habits.
- Celebrate Small Wins: Acknowledge your progress and reward yourself (within your budget, of course!).
Conclusion/Summary
Budgeting is a simple yet powerful tool to take charge of your finances. By following these steps, you can create a realistic budget, save for future goals, and enjoy financial peace of mind. Remember, a budget is not about restricting spending but about making informed financial decisions.
FAQs
1. What is the easiest budgeting method for beginners?
The 50/30/20 rule is the easiest as it provides a simple breakdown of expenses and savings.
2. How do I stick to my budget?
Track spending, review regularly, and use budgeting apps or templates.
3. What should I do if I overspend in a month?
Cut back on non-essential expenses the following month and adjust future budgets.
4. Is budgeting only for people with a steady income?
No, even those with irregular income can budget by estimating an average monthly income.
5. How often should I update my budget?
At least once a month or whenever there’s a significant income or expense change.
“The best investment you’ll ever make is in yourself.” – Warren Buffett
