Practical Budgeting Tips for Beginners

Are you new to budgeting and are looking for practical budgeting tips for beginners even if your finances are not exactly in a bad order? Well, then this post may be for you as I will be sharing some practical budgeting tips for beginners that I learned many moons ago and I think the lessons are still valuable even today. But first, we need to change people’s perception of what budgeting is and what it entails and why you need to have a budget in place. The budgeting tips I share in this post are those that have worked for me for many years and continue to serve me well but first, let’s change your mindset about budgeting.

Budgeting gets a bad rep because people think of ‘setting a budget’ as being too restrictive and something that stops people from having fun which is far from the truth. When you budget you are giving your money direction and a purpose, it is a guide to show you where you are spending (or should) your money so you can make the right financial decisions. Every financial plan has a budget at its core because you need to know, how much you have coming in, how much you are spending and where you are spending so you can allocate money wisely. What you spend your money on is your business, and what everyone considers to be important things is different and that is ok.

Disclaimer: I am not a financial advisor.

Practical Budgeting Tips for Beginners

When I started seriously following a budget, I had just left home for university, I had to plan ahead because lack of student finance meant I had to work two-jobs whilst at university so I could save up for tuition, food and for fun. Those who’ve enjoyed 4-years of university life will know that it costs a lot of money not just tuition fees but the accommodation and keeping yourself alive and sane for a whole 4-years as you navigate whatever is ‘supposedly’ meant to shape the rest of your adult life. Budgeting had always come naturally to me because my mother is a budgeter but that doesn’t mean I followed it every single time, it just means I was aware of it and chose when to follow it (often when it was convenient to me).

When I was thinking about what practical budgeting tips for beginners I could share, I had to think back to my University days and how simple my budget was then. It had 3 focus areas and savings wasn’t one of them; rent & bills, food and fun money. Often once I had contributed my share for the household bills/rent and food, there wasn’t often enough money for fun and sometimes this meant using my credit card and if you read 3 financial mistakes I regret then you would know this was part of the reason I went into debt. Debt is debilitating and not something I would wish on anyone, so if you are new to budgeting and want to avoid going into debt then I hope these practical budgeting tips for beginners are helpful to you.

1. Create a Zero-based Budget

A zero-based budget is a type of budget where your income minus your expenses equates to zero and this simply means that every dollar, pound or whatever your currency is allocated a job. In order to create this type of budget, you need to know all your incomings (salary, side hustle income etc) and you need to also know all your expenditures (bills, debt, savings). This allows you at the get go to understand how much money you get in, how much you spend and if there is any left over money, you need to start thinking about where this money can be used (saving for emergency fund, paying extra towards your debt or investing). You can use my zero-based budget tracker to give you a start at setting your finances in in order.

2. Follow a Cash Diet for Certain Categories

One thing I have noticed over the years for myself and a lot of other people is that when it comes to food categories, almost all of us overspend in that area. This could be because we shop on an empty stop, maybe because we got tempted and bought something we did not plan for, or maybe you just wanted to treat yourselves and this lead to overspending. Whatever the reason, it is important to remember this happens to almost everyone and not to beat yourself over it if it does happen to you.

What I had instead chosen to do to combat my own overspending in the food category is to start following the ‘all cash diet’ and this simply means, for food I withdraw the amount that I normally allocate for food and only use cash. I have noticed that by having cash on hand, I don’t spend too much as I am afraid it will finish before I even purpose what I need to so I end up budgeting for food meticulously.

3. Budgets vary month to month

One of the most important things I learned about budgeting is that, it can vary month to month which means you have to plan your budget monthly. At the beginning of a new month, I take time to review the financial goals I have for that month and understand the types of expenses I am expecting. For example, every January when I used to complete my taxes for the previous financial year, I knew that I would have a tax bill that I need to settle. For most people this could be during the month of April when the financial year ends and a new one begins so you can plan accordingly. It doesn’t mean as an example mentioned above that you only budget to pay the tax bill when it’s due, it means you know its coming due so in your budget every month you set aside an amount to cover the future cost. It is important to remember that for things you know are coming up months ahead of time, make sure to start saving for them now, I personally use sinking funds to save up in advance.

4. Automate Your Expenditures

Now, I know what I said in #2 above. For food it is definitely better to follow a cash diet than using your card. I use a cash diet for both my food and home categories because these are two areas that I often overspend in. But for the rest of my bills, these are all automated, my mortgage is via direct debit (auto-pay) so are my utilities and other home expenses. I also created standing orders for savings which automate my transfer of money into my savings account at a time of my choosing and I only review this once I have achieved a financial goal or need to adjust for other financial goals. It doesn’t need to be too complicated, just automate your bills so you don’t need to think about them and automate your savings (and investing) transfers for a peace of mind.

There are many other practical budgeting tips for beginners that I want to recommend but I think 4 is enough for now, you definitely need to have a budget (whether you write in on your phone, excel or paper is doesn’t matter). I prefer to have my budget in an excel format and write important goals in a notebook. You need to have financial goals – it could be saving up for a house deposit, for a holiday or maybe for an emergency fund whatever it is make sure you have a solid plan by looking at your budget and understanding how you can achieve your goals. If you need more practical tips then I recommend checking out the Ramsey Solutions specifically this article.