How to Make a Fail-Proof Easy Beginner Budget Plan in 7 Simple Steps

You should have some money left over at this point. A sinking fund is simply saving for an expected expenses that doesn’t come up every month. You can save money for these items or pay for them with cash in that month depending on your budget.

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For instance, if your monthly take-home pay (post-tax and other deductions) ranges from $2,500 to $5,000, then create your budget as though you can only expect $2,500 each month. If you end up with more money than you expect, you can save it or use it where it’s needed. No matter which method you choose, it’s a good idea to try to save 10% to 20% of your income each month. Try to put enough into an emergency fund to cover 3 to 6 months of living expenses in case life throws you a curveball. A short-term financial goal, which could take roughly one to three years to reach, might be slashing credit card debt or creating an emergency fund. Meanwhile, a long-term goal could be stashing money for retirement or earmarking money for a child’s college tuition.

What percentage of income should go towards savings vs expenses?

Mistakes allow you to learn, strengthen your resolve, and commit to your budget for the long run. Now that you understand how to create and implement a budget, it’s time to put it into practice. With a budgeting plan in place, you get to decide where your hard-earned money is going. From investing your money in stocks or saving for your kid’s college tuition to taking that much-needed vacation, budgeting can make your dreams more likely to happen. If your income varies because of commission-based jobs or side hustles, base your budget on the lowest amount of money you make. You can treat your more successful months as bonuses.

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It is, however, time consuming and harder to keep up with. Giving each dollar a job is like zero-based budgeting. It’s a plan that has you spend every dollar you earn each month in a productive way and leave no money unaccounted for.

Especially if you’re already stretched thin with your schedule. Flexible side gig opportunities are more prevalent than ever. Many of them are online so you can do them from home. If so, you can make a shared budget and either pool your money or keep certain expenses separate.

How can budgeting keep you out of debt?

• A fatal flaw when paying off debt and bills is forgetting to budget.
• In that case, gather your income information for the past three to six months and calculate the average.
• You can track all of this in a spreadsheet, in a journal or on a budgeting app.

For example, to find your average monthly grocery bill, add up what you 7 steps to a budget made easy spent on groceries in the past three months and divide that value by three. If you spent $1,500 on groceries over the past three months, your average monthly spend is $500. You can use that number to calculate your projected monthly grocery bill. Retirement accounts allow you to help grow your money and lower your tax bill.

If you’re still living paycheck-to-paycheck, your first goal is setting up a $1,000 emergency fund. If you are trying to save or pay off debt, move the money in your budget towards that goal at the START of the pay period. Don’t let it sit in your bank account any longer than you need to because you could feel tempted to spend it on other things. The budgeting process is a revolving cycle — you are constantly either creating a budget, implementing the budget, or reviewing the budget.

• You make minimum payments on everything but your debt with the smallest balance.
• This will be where you can cut costs and start to save money!
• If you end up with more money than you expect, you can save it or use it where it’s needed.
• Giving each dollar a job is like zero-based budgeting.
• Make sure to put it in a secure place like filing them in a shoe box or scan them into a receipt folder on your computer.

Step 2: List Out Expenses and Categorize Them as Fixed or Variable

And if you’ve never created a budget, you may feel overwhelmed by what exactly you are supposed to do, and how you’re supposed to do it. There are countless distractions throughout the month that can derail a budget. Luckily, there are budgeting apps that can vary in methodology, user-friendliness, scope, and other features. The idea behind zero-based budgeting is that every dollar of income is matched to an expense.

Identify your goals

When you are on a tight budget or a low income, it is especially important to do a budget. You don’t have as much leeway in your spending and a small mistake or emergency could be devastating. When using the debt snowball method, a zero-based budget is the best way to make sure that ALL of you money is working for you. Ok, you have your income and set bills and now you see where your money has been going.

The next step is to rank your categories in order of importance to you. For example, if spending money on fun brings passion and joy to your life, then you would rank this category at the top of the list. And if all you use your apartment for is sleeping, then it might end up at the bottom of your list.

Know Your Basic Expenses

In places where you use cash, try to make a best guess at your spending. Also, make note of any minimum payments on debt, as that also has a white-knuckled claim on your money. Crunch the numbers to find out how much you spend on fixed expenses every month.