Budgeting for Beginners: A Step-by-Step Guide to Managing Your Money

Mar 7, 2024 min_read

More and more people started using a budget after inflation levels skyrocketed in 2022. Having a budget can help you increase your retirement savings, create an emergency fund, reach your savings goals, and effectively manage personal finance.

Following a budget won't stop you from spending money. It'll rather help you see what’s most important to you and how you can manage your expenses to get the most out of your income!

Read on to find the best tips and tricks on budgeting for beginners, and create your first plan today. Start by using Honeygain to increase your income effortlessly! Create an account, download the app, and get paid for sharing your internet traffic – it's that easy.

Understanding Budgeting Basics for Beginners

Budgeting is a simple concept that will help you distinguish your wants from your needs. This way, you'll see what expenses are inevitable and what purchases you can cut out.

But the key to keeping up with your budgeting plan is that you must allocate some money to your wants! You can manage your cash flow and stay on track with your budget by setting realistic financial goals to save money.

Fortunately, there are a few tried and trusted budgeting methods that will help you create your first budget and track your spending. Find the best strategy that fits your lifestyle, and know where your money is going on a regular basis!

Envelope System

The envelope system has nothing to do with mail or post offices, but it does include envelopes! In this system, you take an envelope for each spending category you have and fill it with cash allotted to that particular category.

You can have labeled envelopes for bills, taxes, debt, savings, groceries, going out, and other expenses. Create as many envelopes as you need and only spend money from that category when you purchase something.

Although it may sound rough on paper, this budgeting plan has perks. With it, you’re guaranteed to spend only what you had allocated for that particular expense category. It may also push you to use less than anticipated, and those envelopes may be full of extra money at the end of the month.

Percentage System

The percentage system, also known as the 50/30/20 budget, is a relatively simple but effective one. If filling envelopes does not sound like a good idea, this system might be perfect for you. In this system, you spread your month's budget into three categories or percentage parts — 50%, 30%, and 20%.

50% of your income in this system should be used for necessary and unavoidable expenses like bills, food, rent, debt payments, etc. 30% of your income should be used for fun things like going out, watching movies at the cinema, and so on. In other words, the wants rather than needs.

Finally, 20% of your income should be used for savings. This part of your income goes somewhere where you can't touch it. You could use it to build an emergency fund for a rainy day or for future investments to grow your savings.

Zero-Based Budgeting for Beginners

Zero-based budgeting is a more advanced budgeting plan that requires meticulous attention to detail and doesn't tolerate any mistakes. Adopting this system means that every single dollar from your income is fully used for something, leaving you with a zero each month.

Essentially, it’s similar to the envelope system but not just cash-oriented. If you adopt this budgeting plan successfully, you’ll be sure to know how you spend each penny in your wallet and will be able to make adjustments quickly and without any negative repercussions.

As noted, this system requires a lot of attention since even minor miscalculations could lead to a negative budget and make the way to your financial goals longer.

Setting Up Your First Budget

It might seem like the most impossible task you've ever had to do, but don't worry – we have your back! Take a deep breath, and let's start with the basics of budgeting for beginners.

Start by calculating your income and fixed expenses like your rent, mortgage, groceries, and other bills. Then, write down what you spend on entertainment and shopping. Find these figures on your online bank account or draw-up bank statements to see the whole scope of your cash flow.

If you don't know the exact sum of money you spend per month, it would be wise to track your spending for at least 30 days to find your spending patterns. It'll help you set realistic goals and stay on track once you encounter your first challenge.

Once you have all the sums of your expenses, compare them with your total income. Then, pick one of the budgeting systems and divide your expenses into categories to help you reach your savings goals.

Tools and Resources for Budgeting Beginners

Budgeting in the 21st century is the best because you have all the help in the world! The digital age comes with its own perks and tools to help you set and stick to your budget plan.

Use these resources to improve your personal finance game and save enough money for that trip you've always dreamed of! Look through the best tools for budgeting beginners and choose the one that best fits your lifestyle.

Budgeting Apps

There are so many budgeting applications that can help you set realistic goals, calculate all your monthly expenses for you, and analyze your spending habits.

For example, Goodbudget is a great app for beginners who want to use the digital envelope budget system. You'll manually type in your expenses and create categories for your envelopes to track your spending.

You can try out GoodBudget for free and feel if it's the right tool for you! If it helps you reach your savings goals, consider ordering a paid premium for more envelopes and exclusive features.

Find apps that are beginner-friendly and track your progress with the help of your smartphone!


Use spreadsheets to track your expenses if you want to be in total control of your budgeting method and plan. Create your own budget planner or download a customizable spreadsheet from Canva or Etsy.

You can create as many categories as you need, and you don't need to rely on 3rd party products to track how you spend your money.

Just keep in mind that you'll have to manually type in your expenses every time you spend money. It can leave space for human errors and typos.

On the other hand, it's easy to convert your data from numbers to tables, pie charts, and percentages. If you like to see your monthly budget from different angles, spreadsheets can be a way to go.

Custom Templates

You can get customizable budgeting templates on platforms like Canva. It's a flexible and reliable tool to track your expenses.

Use templates if you know what you want to achieve with your financial goals and have confidence that you'll stay on the right track with spending money.

Using templates can be challenging if you've never had a budget before but give it a try and see if it floats your boat! Maybe you'll find the template that includes all the categories you're looking for in a budgeting tool, and it'll improve your finance game.

Common Budgeting Challenges and Solutions

Most people make a budget when they need help to start saving money. So, the common misconception is that in order to increase your savings, you have to cut out all fun purchases and only focus on bills and taxes.

This way of budgeting is unsustainable, and realizing it’ll make budgeting easier! You can't cut out all the expenses for going out, shopping, and eating in restaurants because you'll be more likely to ditch the budget and return to old spending habits.

Learning mindful budgeting will help you manage financial accounts easier. You'll have money for monthly variable expenses and some to put in your savings accounts!

Build a budgeting plan you feel comfortable with, and it'll become easier to stick with it. You notice how you're still living your best life and have an emergency fund to fall back on when needed!

Advancing Your Budgeting Skills

Once you've got the basics down, you can review your budget to accommodate the changes in your daily spending. Your budget should reflect your current spending patterns and monthly income.

If one of these changes, it might be wise to adjust your budget plan. For instance, you get a new car and your car insurance changes. That means you must review your existing plan, set new goals, or create new categories to help you save.

Also, set aside some money to invest in yourself. Take courses and classes to understand better how to manage your personal finance and the methods that finance professionals use.

And if you need more help and support to stay on track, consult an expert! Find a financial advisor that you trust and ask for help. Your bank account will thank you!

Budgeting for Beginners

It might seem daunting to start budgeting, but it's easy if you have the right tools! Choose your favorite budgeting method to get on the right track and make adjustments as you go.

You can use the envelope system to place your expenses into categories, divide your expenses 50/30/20 depending on your income, or choose zero-based budgeting to reach your money goals!

When you get the hang of it, invest in yourself and improve your personal finance game by reading finance books and watching online courses.

And if you want to have a bigger monthly budget – download Honeygain and start earning passive income every day!