How To Get Started With Your First Budget

by Hank Coleman

How to set up your first budgetA lot of people hate the B word. I have to admit it myself that I do not enjoy budgeting. But, budgeting is a great way to make sure that you have enough money to pay the bills each month. It is also a way for you to save for different financial goals you may have in life like retiring early, finishing your bucket list, or sending your children to college.

The hardest part of budgeting may be simply starting. So many people do not know where to start or how to get going.

Starting a budget that makes sense can take a little bit of time at first, but it is well worth the time and effort that you put in. Here are some steps to help you get started with your first budget.

Find That Missing Cash

The most important thing about a budget is truly being honest with yourself about your income and spending habits. This can be hard especially if you use a lot of cash to make purchases.

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It is relatively easy to see where your money goes on credit card statements and bank records from your debit card, but cash has a tendency to simply disappear. One great way to find out where your money is going is to keep a journal of all your transactions. For one week, try writing down every time you spend money on something. I think that you will be quite surprised when you add it all up in the end.

Laying It All Out There

To make a budget work, you need to find everything both your income and your expenses and put them all on the table. You need to find out how much income you are really bring in and not just a guess as to what your pre-tax salary is. You may be surprised by things on your pay stub that you haven’t looked at in years like your withholdings.

Actually Setting Up The Budget

Now is the time to write your budget down. Start by listing your monthly income and then begin subtracting all your expenses that you encounter every month. There are several software programs that can help with this if you did not want to use the tried and true pen and paper method.

I like to use Microsoft Excel to help me with my budget. Quicken is another popular finance software that can help you set up a budget and monitor your accounts. Many people also use Mint.com, which is a free online web-based system where you can set goals, monitor your spending, build a budget, and see all your accounts in one location. Either way, these programs can automatically update all of your many accounts, categorize your spending, and help you build a budget.

Once you have a true picture of your income and your monthly expenses, it is time to see where you stand. You may make the stark realization that you are spending more than you bring in every month and have a negative cash flow.

By looking at your expenses that you have listed on your budget, you can see where you may need cut back to make your budget balance. If you are cash flow positive, it is important to look at your goals. Do you want to save more? Do you want to buy a house?

Whatever your financial goal is, you can use your budget to start factoring that money in it in order to reach those goals. You can then play with different spending categories to see where you can find money to get to your goal.

However, by having it all laid out in a budget, you now have the power to make decisions where you want to go with your finances. A budget makes it easy to see where you are, where you want to go, and how to get there.

About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and is currently pursuing his Certified Financial Planner credentials. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 525 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 26 comments… read them below or add one }

Kurt @ Money Counselor

“A budget makes it easy to see where you are, where you want to go, and how to get there.” Right on! A budget’s value is measured by how well it helps you make better money decisions. That’s the whole idea of budgeting, right?
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Paul @ The Frugal Toad

Great message Hank! It’s difficult to get a handle on spending if you don’t have a plan.
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Elizabeth @ Simple Finance

Yeah, I’m one of those people who HATE to budget – it just feels so restrictive, and since I like to rebel, I’m tempted to blow my budget just to prove my nonconfirmity. That said, laying it all out there and seeing exactly where I’m wasting my money is enough to keep me on track. Nothing like seeing $75 spent on fast food to get you back into shape (figuratively and financially).
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Taline

Without a budget, people go about figuring out their finances with a blindfold. I may not like it, but I do it to see where I am at and where I want to be.
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Stephen

I can understand what you mean why people hates the B word. In my case, it gives me a sense that I am not free to spend the money to my choosing. I was wrong.

It is more better to keep track of my expenditures since it can help me create a leeway for my pleasure spending.
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Sherry

I certainly do some of the things you mentioned. See, it’s just my first job and I want to really save money for myself. I try to calculate my expenses for everyday and I get a pretty good amount of savings at the end of the week. It’s much better to start learning how to budget at an early age, right? Thanks!
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