Affiliate Disclosure: This post may include affiliate links. Learn more
Feel like your paycheck disappears the second it hits your account? You’re not alone. A lot of people get to the end of the month and wonder where all their money went. That’s where budgeting comes in — and no, it’s not as boring or scary as it sounds.
Let’s walk through it together, step by step. Like friends talking at a coffee shop. I’ll show you how to create your first budget, even if you’ve never looked at your bank account on purpose.
First, Let’s Talk About What a Budget Really Is
You might think a budget is some spreadsheet with a bunch of rules and restrictions. But here’s the truth:
A budget is just a plan for your money.
That’s it. Nothing scary. Just a simple plan.
It helps you decide ahead of time where your money should go — instead of wondering where it went. It’s about telling your money what to do, instead of letting it disappear on takeout and Amazon orders you forgot about.
A good budget gives you:
-
Control (you’re in charge now)
-
Clarity (no more guessing)
-
Confidence (yes, you can save and get ahead)
Step 1: Know What’s Coming In and Going Out
Before we can make a plan, we need to know what we’re working with.
Grab a notepad or open your Notes app. Answer these two questions:
1. How much money do you bring in each month?
We’re talking take-home pay — what actually hits your bank account after taxes, insurance, etc.
If you get paid every two weeks, multiply your paycheck by 2. If you freelance or have a side hustle, take your average over the last few months.
2. Where is your money going?
This is the part that surprises most people.
Start by looking at your bank and credit card statements. You’ll probably see categories like:
-
Rent or mortgage
-
Groceries
-
Gas or transportation
-
Subscriptions
-
Eating out
-
Shopping
-
Debt payments
Add it all up.
Want to make this easier? Check out our Net Worth Calculator and Debt-to-Income Calculator. These tools help you see the full picture.
Step 2: List Out Your Monthly Expenses
Now it’s time to write it down. Every single thing.
I like to break mine into two simple groups:
Fixed Expenses
Same amount every month:
-
Rent
-
Car payment
-
Internet
-
Phone bill
-
Insurance
Variable Expenses
Different every month:
-
Groceries
-
Gas
-
Takeout
-
Shopping
-
Entertainment
Don’t worry about being perfect — just get everything down. You can clean it up later. If you’re interested, I have created a monthly budget sheet where you can list out your income and expenses. Click here to check that out.
Step 3: Subtract Your Expenses from Your Income
Okay, now do a little math:
Total Income – Total Expenses = What’s Left
There are three possible results:
-
You have money left over (yay! Let’s put that to work.)
-
You’re breaking even (okay, we’ve got some adjusting to do.)
-
You’re spending more than you earn (don’t panic — this is fixable.)
Seeing the numbers for the first time might feel overwhelming. But trust me, awareness is power. Now we can do something about it.
Step 4: Try the 50/30/20 Rule
The 50/30/20 Rule:
-
50% Needs – rent, food, bills, gas
-
30% Wants – fun stuff like Netflix, dining out, shopping
-
20% Savings & Debt Payoff – emergency fund, paying off credit cards, etc.
Is this perfect for everyone? Nope. But it’s a great starting point. You can adjust as your life and goals change.
Step 5: Pick a Budgeting Method You’ll Actually Use
This one’s big: Don’t pick a system you hate.
Pick something that fits your style.
Here are three simple options:
1. The Spreadsheet Method
Great if you like structure and want full control.
We’re building a free Google Sheets budget template at FIREInstitute.com that’s easy, beginner-friendly, and color-coded so you can’t mess it up. Click here to check that out.
2. The App Method
Apps like Mint, YNAB, and EveryDollar do most of the work for you. They connect to your bank accounts and track spending automatically.
3. The Envelope Method (or Digital Envelopes)
Old-school but effective. You divide your cash (or categories) into envelopes. When it’s gone, it’s gone. You can also do this digitally with budgeting apps. Personally, I don’t like this method, but to each their own!
Step 6: Look for Spending Leaks
Let’s talk about leaks — those sneaky expenses that drain your money without you noticing.
Some common leaks:
-
Food delivery (that $8 delivery fee adds up)
-
Unused subscriptions (do you really need 4 streaming services?)
-
Impulse shopping (Amazon, we’re looking at you)
Scroll through your last 1–2 months of bank activity and highlight anything that:
-
You forgot about
-
You didn’t plan for
-
Didn’t bring you much joy
These are your budget leaks. Plugging just a few of them can free up hundreds per month.
Pay Yourself First
Here’s a money trick that actually works:
Save first. Spend second.
Most people try to save what’s left at the end of the month — but let’s be honest, there’s usually nothing left.
Instead, treat saving like a bill.
-
Automate $25–$50/week (really just whatever you can afford) to a separate savings account. I love apps like Wealthfront for my emergency fund (Currently they pay a 4% apr), and Acorns to invest my pennies. There are others and many are great, so do your own research and decise what fits for you.
-
Schedule it to be withdrawn a day or two after it hits your bank each month, or even better, every paycheck.
That way, you’re building savings without thinking about it.
Step 8: Make It a Monthly Habit
The goal isn’t to think about your budget every day. But once a month? Definitely.
To make it easy, put a reminder on your phone tp trigger once a month, and then take 15 minutes to review your budget.
In that 15-minute check-in:
-
Look at last month’s budget
-
See what worked and what didn’t
-
Adjust for the new month (birthdays, trips, seasonal bills)
It’s like doing a quick oil change for your money. Keep everything running smooth.
Look, budgeting isn’t about punishing or depriving yourself. It’s truly about freedom.
Freedom to:
-
Stop worrying about bills and looking forward to see how you did each month.
-
Say “yes” to the things you really want and the budget for them.
-
Build a future you’re excited about.
-
And ultimately, reach financial independence, one step at a time
Your first budget won’t be perfect. That’s okay. The key is to start. You can tweak and improve along the way.
- Start by tracking your spending
- Use our free calculators to see where you stand
- Download our budget template
- Join our newsletter to stay motivated
You’ve got this. And we’re here to help every step of the way.
