Saving 7 Steps to Start Budgeting Today

If you’re finally ready to take control of your finances, you’ll need to know how to budget properly. Here’s how to start from scratch, according to a certified professional.

By Janet Berry-Johnson Illustration by Danie Drankwalter
PUBLISHED 01/20/2023 | 6

When it comes to getting your financial life in order, the word “budgeting” comes up often. That’s because it works.

According to a survey of 1,000 Americans, 80% used a budget in 2021—up from 68% in 2019. And 88% of those budgeters said doing so got them or kept them out of debt. Wow.

If you’re considering a budget for the first time, here are seven short steps to take to help you get started.

1. Figure Out Your “Why”

Why do you want to start budgeting? Sure, the simple answer is to have better control over your money, but chances are that’s not your real motivation. Do you want the freedom that comes from being debt-free? To pay for your child’s education? To have enough money to travel the world in retirement? Understanding your ultimate goal is essential: According to a study reported in the journal from the Association for Psychological Science, setting goals is linked to higher motivation and improved task performance. So decide why you want to follow a budget and you’ll likely be more motivated to see it through.

2. Calculate Your Income

To map out your spending and saving plan accurately, you’ll need to know how much money you have to work with. Add up your monthly income from all sources including wages, self-employment and investments. If your income fluctuates each month, budget based on an average of what you bring in. When you have higher income in some months, you can allocate it to months with lower income or use it to pay down debt, build your emergency fund or save for another goal.

3. Track Your Current Spending

Yes, it’s not pleasant, but to create a realistic budget, you need to know what you’re spending. Track all your purchases over the next 30 days or use your bank and credit card statements to see what you spent over the past month (and on what). These numbers can help you set realistic goals for each spending category—what can you cut back on? What’s not necessary?

4. Don’t Forget Irregular Expenses

Your annual car registration, your child’s summer camp fees, your best friend’s wedding—yearly expenses and events can blow your budget if you’re not prepared for them. So look at your credit card or bank statements for the past year, make a list of expenses that tend to come up and consider how you’ll budget for them.

There are two ways you can do this:

  • Divide the expense by 12 and add a saving of one-twelfth of the cost to each month.
  • Divide the expense by 12 and add a saving of one-twelfth of the cost to each month.

5. Choose a Budgeting Method

There are many different budgeting methods to choose from, each with pros and cons. Here are a few popular ones to consider:

50/30/20 method. This method recommends spending 50% of your after-tax income on needs (such as housing, utilities, insurance and food), 30% on wants (such as dining out, entertainment and shopping) and 20% on savings (including retirement account contributions and emergency fund). This is a good budgeting option if you’re looking for simplicity and flexibility in your budget, since you only need to track three broad categories.

Zero-based budgeting. When you use this method, your income, minus expenses and savings, equals zero by the end of the month. Zero-based budgeting works best if you’re detail-oriented and don’t mind tracking where every penny goes.

Cash envelope system. At the beginning of each month, you withdraw cash for groceries, dining out, gas, entertainment and other expenses. Then you divvy up that money into envelopes for each category and take cash from the appropriate envelope anytime you spend. This method is helpful for people who tend to overspend on impulse purchases because, when the envelope is empty, you’re done spending in that category for the month—no using the credit or debit card.

Once you pick a budgeting method, try it for at least three months. If you find that it’s not working, feel free to tweak it or try a different method.

6. Select Your Budgeting Tool

While it’s entirely possible to track your budget in a notebook or spreadsheet, a budgeting app makes the process much easier.

Apps like Mint, YNAB or PocketGuard link your bank and credit card accounts to track your spending automatically. You can review your budget anytime to see how much you’ve spent and what’s left over.

7. Hold Yourself Accountable

A budget only works if you use it, so review yours at least once a month to see the progress you’re making toward your saving and spending goals. Creating and maintaining a budget can be challenging when you’re first getting started—but stick with it. Before long, you’ll be on the road to a more organized and fiscally responsible financial life.

Millie content is licensed from Dotdash Meredith, publisher of Millie, Real Simple, InStyle, Investopedia, The Balance and more.

Janet Berry-Johnson is a CPA and a freelance writer who enjoys making complicated topics, like accounting and taxes, easy to understand.


Sign up for our free, weekly newsletter


great financial
advice delivered
right to your