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Budgeting- a term so synonymous, yet loathed, with personal finance that you cannot take one step into the world of finances with running right into it. While not everyone’s favorite topic, budgeting is one of the key ways to better understand and improve your financial position. That is not saying that if you do not follow a strict budget you will not succeed at saving. But understanding where our money goes and what areas we have opportunity in is a huge first step towards improving your finances. Check out some of the best budgeting tips for beginners and get started on your savings journey today.
What is a budget?
A budget is a guideline and tool that helps us understand where your money is being spent and how much you should actually be spending. Most people are unaware of how much they are spending on restaurants or shopping every month. We spend what we have and wait ‘til the next paycheck. Most people are surprised when they actually put pen to paper and realize they spend much more than they ever would have expected on things that wouldn’t deem as necessary. A budget helps highlight where overspending is occurring and gives us goals to target.
Why is having a budget important?
Budgets show us where our opportunities are.
If you don’t know where you are starting from financially, it will be difficult to improve. You have to understand your base case to identify your opportunities. By tracking your spending through budgeting, you will gain a better idea of how much you are spending in every area of your life. This will help you identify areas where you can cut back in order to increase savings. Most people may not realize just how much all of their seemingly affordable network subscriptions are costing them until they add them all up under one-line item. From there you can assess what is truly necessary.
Budgeting helps us make meaningful purchases.
Once you become better acquainted with where your money is going every day, you will be more aware of every purchase you are making. Shocked by your monthly restaurant total? Knowing this total will help you think twice about always getting that appetizer while out. I say this coming from experience. Understanding just how many shopping purchases you make every month will take some of the thrill away when you see those brown boxes piled up in front of your door. Am I buying what is necessarily or what I actually want? Tracking a budget can help highlight meaningless shopping and help us hone in on purchasing what will increase our value of life.
Having a budget forces us to be more accountable.
Most of us don’t like to face reality- it’s okay we are human. Having a budget is a tool that helps us face reality. By having to analyze and track every purchase we make each month, we are forced to accept and acknowledge those purchases. This in itself can help us keep ourselves honest. The most effective way to use this to your advantage is to use the calendar tracking method below.
Related Resources:
- Try the Clever Fox Budget Planner and Expense Tracker
- 5 Money Saving Challenges You Must Try
- 45 Easy Ways to Save Money
What should be included?
If you aren’t sure where to begin, start by outlining some basic categories.
- Housing expenses (rent, mortgage, insurance)
- Utilities (water, gas, electricity)
- Food expenses – I like to break
this category into two sub categories, eating out and groceries, so I can track
how well I am doing eating cheaper meals prepared at home
- Eating out
- Groceries
- Auto expenses (gas, insurance, maintenance)
- Shopping expenses (general shopping, clothing, books, music)
- Media expenses (cable, internet, subscriptions, phone)
- Gym expenses
- Travel expenses
- Miscellaneous (gifts, one-off expenses, etc)
I recommend starting out with broad genres to get an idea of where you are generally spending money. As you get more comfortable you can begin breaking them down into more specific categories.
To give you an idea, below are my current categories:

Cater your budget set up to meet your needs such that you can optimize tracking and hone in areas of opportunity.
Best Budgeting Techniques for Beginners
The Calendar Method
The Calendar Method consists of using a wall calendar or desk calendar to track your purchases. At the end of every day, come home and write down every purchase you made and how much you spent. You can color code the categories as well to visually show your heavy spend areas. This method is the most eye opening as you track your expenses every day. It is much easier to see where your high monthly restaurant totals are coming from when you write two restaurant purchases on your calendar every day.

The Cash Envelope System
With the cash envelope wallet system, you will turn discretionary budget categories (think clothing, eating out, alcohol, etc) into actual envelope categories. In each envelope, put your monthly allotment of cash into it at the start of each month. For example, if you are budgeting $100 for eating out you would create an envelope for “eating out” and put $100 in. Throughout the month, if you wish to eat out you would pay for it out of the “eating out” envelope. Once you have used up your $100, you cannot eat out anymore that month.
The Cash Envelope Wallet System is so effective because it helps drive conscious spending and makes going over budget a much more conscious decision.
Related Resources:
The Spreadsheet Method.
This method is similar to the Calendar Method, except you track your spending in a spreadsheet online. You can do this daily, weekly, or monthly by pulling up your credit car bills and transcribing your purchases. Cash transactions can be tracked manually through the calendar app on your phone. While manually transcribing all of your purchases may seem like a daunting and unnecessary task- it makes one think “Why do I have so many purchases to transcribe in the first place?” This method can be a great way to begin tracking your spending as you categorize and sort every purchase yourself.

Use an automated tracking app.
The most popular method to track your budget is via an automated tracking app like Mint or Personal Capital. You can link your bank and credit card accounts securely to your account and these websites will pull and categorize all of your purchases. This method gives you a good overview of where your money is going and allows you to analyze the data quickly as all of the manual sorting is done automatically.
How to be successful through budgeting.
The key to succeeding through budgeting isn’t successfully adhering to a strict budget. The key is using that budget to better understand where your money is going and identifying areas where you can cut back. From there you can begin to identify spending goals in your budget categories and use those goals to help you make mindful purchases.