Budgeting is one of the most important habits for achieving financial freedom. In the world of personal finance, everything begins with a budget. While the idea of financial freedom can look different for everyone, it typically means breaking free from money stress—whether that’s from student loans, car payments, medical bills, or simply not having enough money to live the life you want.
Creating and maintaining a budget gives you control. You’ll gain insight into how much money you earn, how much you spend, and where your money is (or isn’t) going—like if you're not saving anything at all. Budgeting is how you take control of your money instead of letting it control you.
In this post, we’ll walk through how to start budgeting, what you need to do before you create a budget, and the exact steps to follow—plus some helpful budgeting resources.
Step 1: Decide If You're Ready to Budget
The very first thing to do before you start budgeting is ask yourself:
👉 Am I ready to commit to budgeting?
Budgeting doesn’t have to take hours every day, but it does require some consistency—especially in the beginning when you’re reviewing all your numbers. You’ll need to give budgeting some attention before it becomes a habit.
Step 2: Know Your “Why” Behind Budgeting
This may be the most important step of all. You must understand why you want to budget. Your reason should be deeply personal and motivating enough to carry you through the rough patches—like when you’re tempted to overspend or make a big purchase you can’t afford.
Whether it’s to pay off debt, buy a house, take a dream vacation, or simply stop living paycheck to paycheck, your "why" will keep you focused.
Step 3: Set Specific Budgeting Goals
Once your mindset is right, it’s time to write down your budgeting goals. Be specific and set a timeline.
Example:
🎯 Goal: I will pay off $25,000 in student loan debt by December 2025.
📈 Action: I’ll get a part-time job to bring in an extra $500/month to meet this goal.
Step 4: List All Sources of Monthly Income
Next, document every source of monthly income:
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Full-time job salary
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Side hustles
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Child support or other assistance
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Small business income
💡 Pro Tip: If your income fluctuates, budget based on your lowest-earning month. That way, you're always prepared—even during slow months.
Step 5: Write Down All Monthly Bills
Now, list every monthly bill you pay. Include rent, car note, credit cards, insurance, streaming services—everything.
🧾 Review your bank and credit card statements to catch those small recurring charges (like Apple iCloud or forgotten subscriptions).
Step 6: Track Monthly Expenses
Unlike fixed bills, expenses vary month to month. These can include:
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Groceries
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Gas
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Dining out
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Utilities like electric or water
Write down a worst-case estimate for each category based on your most expensive months. For example:
🍽 Food expenses: $395 on a good month, $500 on a bad one? Budget for $500.
Step 7: Calculate Your Discretionary Income
Time for the math:
📊 Total your monthly income
➖ Subtract monthly bills + expenses
💵 The remainder = your discretionary income
This leftover money should be used to:
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Work toward your financial goals
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Add to savings
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Pay off debt
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Enjoy life (within reason!)
🔁 If there's nothing left after bills and expenses, don’t panic. That’s actually helpful to know! You can now adjust in one of three ways:
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Lower your bills
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Cut unnecessary expenses
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Increase your income
Final Thoughts: Starting Your Budgeting Journey
This process is your beginner’s guide to budgeting and building the foundation for long-term financial success.
💡 Budgeting isn’t a one-time thing. Ideally, you’ll review your budget monthly—or even every payday—to stay on track.
Don’t be discouraged by your starting numbers. Use them as a baseline to grow from. Your budget will evolve as your income increases, debt decreases, and your goals shift.
Remember: Personal finance is personal. Do what works best for you and your journey.
Ready to take control of your finances?
💬 Leave a comment with your budgeting goals or share this post with someone who needs help getting started!