Budgeting is like a colonoscopy: a pain in the a$$ but very necessary.
Yes, we said it. No one really enjoys creating a budget, but once you experience the benefits, you’ll see why it’s worth it. Budgeting isn’t about depriving yourself of fun; it’s about gaining control, feeling less stressed about money, and confidently planning for the future. Let’s demystify budgeting, breaking it down into a few practical steps that anyone—yes, even those who dread it—can follow.
You don’t need to be a financial genius or spend hours tracking every penny. Just a few simple steps, and you’ll be on the path to financial clarity.
Ready to get started? Here’s the easiest budgeting guide you’ll ever read. It’ll take just a few minutes.
Step 1: Figure Out Your Monthly Income
The foundation of any good budget is knowing how much money you’re working with each month. To start, calculate your take-home pay—this is your income after taxes, deductions, and other withholdings. Don’t overlook any side hustle income or money you might make from investments or odd jobs. Everything counts.
Why focus on take-home pay? This is the money you actually have to work with each month. Your gross pay might look great on paper, but what you see in your bank account is often a different story.
Tip: If your income varies month-to-month (e.g., freelancers, gig workers), look at your last three months and calculate an average. This will give you a more accurate picture of what you usually bring in.
Once you’ve nailed down your income, it’s time to look at your spending.
Step 2: Track Your Expenses (But Keep It Simple)
Here’s where many people feel overwhelmed. But you don’t need a microscope to track every single coffee or snack you buy. Instead, break it down into big categories:
Housing: Rent or mortgage, utilities, and internet
Transportation: Gas, public transport, car payments, and insurance
Groceries: Your monthly food costs
Debt: Payments for credit cards, student loans, and other obligations
Savings/Investments: Any contributions to your retirement fund, emergency fund, or other savings
Fun Money: This is for the things you enjoy—dining out, entertainment, and hobbies.
By organizing your spending into categories, you get a clear view of where most of your money goes without obsessing over individual transactions.
Tip: If you’re unsure about what you spend, take a quick look at your last two to three bank or credit card statements. Most people are surprised to see where their money actually goes.
Using an app can also simplify things. Apps like YNAB (You Need A Budget) or Mint help you keep tabs on spending without much effort. Not sponsored—but worth checking out.
Step 3: Use the 50/30/20 Rule
For beginners, the 50/30/20 rule is one of the simplest and most effective budgeting methods out there.
50% of your income goes to needs. These are the essentials—housing, utilities, groceries, transportation, and debt payments.
30% goes to wants. This is your fun money. Think of it as the freedom to indulge in things like dining out, Netflix, hobbies, or maybe even a small gambling fund (if that’s your thing).
20% goes to savings or debt payments. This helps you build a financial cushion, whether it’s for retirement, an emergency fund, or paying off debt faster.
If you’re working towards a big savings goal (like buying a house or car), you can tweak the percentages to save more. But as a general rule, 50/30/20 is a good starting point.
Why This Works
The 50/30/20 rule keeps things flexible and focused. You know exactly how much of your income is going to essentials, fun, and savings, so you’re not stressing over every dollar. This approach helps you avoid the trap of either overspending or underspending, letting you enjoy your life while planning for the future.
Step 4: Automate Your Savings
Automation is your friend. It’s much easier to save money when you don’t have to think about it constantly. Set up automatic monthly transfers from your checking to your savings account so that money is already working for you.
Aim to save 10-20% of your income each month. Start with an amount you’re comfortable with. Even $50 a month is a solid start, and you can always increase it later.
Pro tip: Set your transfer date to match up with payday. This way, saving becomes a part of your routine, and you won’t feel like you’re missing that money.
Building an Emergency Fund
Having 3-6 months of living expenses in an emergency fund is key to long-term financial stability. This may take time to build up, but regular contributions (even small ones) will get you there.
Step 5: Adjust and Review Regularly
A budget isn’t set in stone—it’s a roadmap that you can adjust as needed. Life happens; maybe you have a big expense one month, or you get a raise. Review your budget monthly to see if you’re on track and make changes if necessary. Being flexible with your budget helps you stay committed without feeling restricted.
Monthly check-ins are enough. Ask yourself: Did I stick to my spending goals? Was there an unexpected expense? Do I need to adjust anything for next month?
Adjust based on your goals: Maybe you want to increase your savings rate, or perhaps you’re looking to cut back on dining out. Your budget should evolve as your life changes.
Why Budgeting Actually Makes Life Better
Budgeting is a tool to help you live your best life today and plan for tomorrow. Think of it as creating a path to the things that matter most to you—whether that’s financial freedom, a comfortable retirement, or that dream vacation.
More Control: When you know where your money is going, you’re less likely to feel that panic at the end of the month.
Less Stress: Financial anxiety usually stems from a lack of control. Budgeting helps you anticipate and manage expenses, giving you peace of mind.
Greater Flexibility: With a clear understanding of your finances, you can make changes without feeling like you’re constantly scrambling.
Achieving Goals Faster: By dedicating a portion of your income to savings and debt repayment, you’re building wealth and freeing up money to achieve your goals.
The Mindset Shift: It’s All About Progress, Not Perfection
No one is perfect at budgeting. There will be months when you go overboard on your “fun money” or splurge on something you didn’t plan for. That’s okay. Budgeting is about making progress, not achieving perfection. The fact that you’re tracking and adjusting means you’re already ahead.
Think of budgeting as a practice rather than a strict rulebook. It’s about learning how to make your money work for you—not chaining yourself to a spreadsheet.
Final Thoughts
In the end, budgeting isn’t about restriction; it’s about empowerment. With a clear plan, you’ll feel more in control of your finances and more prepared for whatever life throws your way. Just like a colonoscopy, it’s a bit uncomfortable to start, but the payoff is worth it. Plus, once you’ve got the basics down, budgeting only takes a few minutes each month to maintain.
Budgeting is your roadmap to financial peace and freedom. So start small, stay flexible, and keep moving forward. Here’s to financial freedom, one budget-friendly step at a time.
