Budgeting Basics: How to Get Started

Tara Seboldt
Feb 22, 2022

Budgeting can help you make smarter monetary decisions that lead to a better financial situation. It’s also easier than it looks. Check out these budgeting basics to help you start financial planning.

Types of Budgeting

Budgeting isn’t a one-size-fits-all approach. Everyone’s financial situation is different.

Luckily, there are several different types of budgeting and spending plans you can use.

These methods work like templates, so you can customize them to fit your situation and budgeting needs:


This budgeting system started in the business world. It helps businesses actively use every dollar they make. This eliminates money sitting without a purpose.

Zero-based budgeting has caught on for personal finance, as well. The idea is to allocate every dollar you earn for the month.

Each dollar has a job, whether it’s paying rent or going toward savings. With your money allocated, you “zero out” your income and monthly expenses.

For example, you make $1,000 from all of your sources of income.

Your expenses are:

  • Rent: $400
  • Car Insurance: $200
  • Utilities: $75
  • Groceries: $125

After these expenses, you still have $200 that needs a purpose. You decide to put it into a savings account.

If you subtract your total expenses (including savings) from your income, you get zero.

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Envelope System

The envelope system uses cash to curb overspending. You start by setting a spending limit for each of your living expenses.

Next, you create a physical envelope for each category, like car payments and cell phones.

You then fill the envelopes with cash equal to the spending limit.

Let’s say you limit your grocery spending to $300 for the month.

Your “groceries” envelope starts with $300 in cash.

You take the envelope to the store with you and pay using the cash inside.

Once the envelope is empty, you’re not supposed to spend any more on that category.

The envelope system is good if you need a hard limit to your spending. Credit cards and debit cards are easy to swipe, regardless of the total.

Having to physically count out bills makes spending feel more real

50/30/20 Budget

Sometimes simple is best when you’re first learning to budget. The 50/30/20 method is straightforward. It also gives you room to customize your spending.

It works by allocating 50% of your income to needs, 30% to wants and 20% to savings and debt repayment.

Unlike zero-based budgeting or the envelope method, this plan doesn’t require a lot of extra work to track spending.

Consider if you have a monthly income of $1,000.

You can spend 50%, or $500, on necessary expenditures.

The next 30%, or $300, goes toward wants. This can include entertainment and purchases that might be considered frivolous.

The final 20%, or $200, goes to savings or paying off debt like credit cards.

Don’t get caught up in the exact percentages of this method. For example, if your needs take up 60% of your income, adjust the other categories.

How to Get Started

There’s no secret formula to crafting the perfect monthly budget.

Budgets often work best by trial and error, until you find a method that works for you.

Start by figuring out your monthly income and expenses. Then, pick a budgeting system you like and apply your finances to it.

You should also set money goals when budgeting. Setting savings goals helps your budget stay on track.

Financial goals can range from paying off a certain amount of debt to saving up for a vacation.

Try to make both long-term and short-term goals.

For example, your budget has $300 left over after expenses.

Your goal is to pay off $900 of debt.

You put your extra money per month into paying down your debt and are debt-free in three months.

Now you can use the $300 a month for your next goal, such as creating an emergency fund.

Easy Budgeting Ideas

There are lots of ways to make your budget successful. These budgeting ideas will help you start making smart money moves.

Use Budgeting Apps

Technology makes it easy to track your spending and manage your money. You can choose from several budgeting apps for your smartphone or tablet.

These apps help you track spending, allocate funds, and plan your budget. Many apps feature alerts to let you know when you’re overspending or when a bill is due.

You may also get access to budget worksheets, which can help you get organized.

Involve Your Children

Children’s money habits are often set by age 7. Children as young as 3 can usually grasp basic money concepts.

Showing your children good money habits—like budgeting—can set them up for future financial success.

An easy way to involve children in money management is to let them make purchases in cash, whether it's from an allowance, gift, or reward.

If they’re old enough to count money, you can help your child count out the correct change at the store. They can then hand the physical money over to the cashier.

This simple process helps your child understand how spending works. They’ll remember the feeling of the money leaving their hands, and understand that money spent is replaced with whatever they buy.

This could help them avoid overspending as they get older, and understand the concept of saving for an item they want.

Add a Safety Net

Unfortunately, no plan is perfect and situations can change. Aim to add wiggle room to your budget so you have enough money for unexpected changes.

For example, you normally spend $200 on gas. However, you allocate $250 for fuel in case prices go up.

If they rise, you have an additional $50 to cover the higher costs, and if they don't, you can always tuck that extra money into an emergency fund.

Be Flexible

Your budget shouldn’t be set in stone. One of the biggest misconceptions of budgeting is that it's a rigid system that forces austerity.

The opposite is true. Budgeting can open up many possibilities, from saving up for a vacation to adjusting expenses so you can afford a "fun fund".

You should regularly review your budget to see if it still makes sense, or if your goals have changed. If something in your budget isn’t working, you can change it to make it work.

Don’t Forget To Include Savings

Setting aside money for savings is one of the most important budgeting basics, but it’s often overlooked.

Saving something is better than nothing—even if it’s only a few dollars per paycheck.

Try these tips to help you grow your savings:

  • Automating savings: Setting up an automatic payment to your savings account forces you to save money. It eliminates the chance to spend money that’s meant for savings by not giving you access. Many employers let you put portions of your paycheck directly into different bank accounts using direct deposit.
  • Counting your change: Pull out any loose change or cash you have at the end of the day and set it aside. Use a jar to save each day’s change and deposit it in the bank at the end of the month. You might be surprised how much can add up over time.
  • Restricting access to funds: Certain accounts make it harder to access your money, which means it’s harder to spend. Retirement savings like an IRA, for example, can't be accessed until a certain age.

Start Budgeting Today

Creating a budget and sticking to it doesn’t have to be difficult. The most important part of budgeting is to get started.

You can always tweak it as needed. Set yourself—and your children—up for financial success using these budgeting basics today.

Tara Seboldt

Tara is a financial writer with over five years of professional writing experience. She previously worked at a financial planning firm. Tara uses this professional experience to help readers better understand their finances and make smart financial moves. When she’s not writing about money, Tara enjoys spending time in the Idaho mountains hiking, camping, and skiing.

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