How to Budget Your Money Like a Pro & Go from Broke to Woke in 2022

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From learning what it takes to meet your financial goals to exploring what a good budget includes, this guide will teach you how to budget your money, step by step.

Sure, you’ve probably heard about budgeting and how important it is for your financial future, but how do you even START when you are a total budgeting beginner?

If you are someone who feels like they are just throwing money away every day without knowing where it is going, read on to find out how to make a budget plan you can stick to without pain.

A dustpan full of money being thrown away

What a good budget includes

What is it about the word ‘budget’ that makes us break out into a cold sweat?

The truth is, it is way too easy to lose track of your money and spend it all before the next paycheck.

Turns out almost everyone is bad at saving money — in fact, even high-earners that rake in $150,000 or more per year are living paycheck to paycheck!

You read that right – around 78% of Americans live paycheck to paycheck!

When people hear the word budget, they groan.

Why?

Because it brings up images of restriction and that’s just no fun. They get used to spending money whenever they darn well feel like it.

The good news is, if a budget feels uncomfortable, then it’s not a good budget.

The perfect budget should fit you like your favorite jeans.

It shouldn’t be as loose as 90s JNCO jeans (remember those?) and not as tight as jeggings. It should give you the right amount of structure without cutting off your emotional circulation.

As you create a budget, here are the categories and items you need to include.

This will keep the budget in check so it gives you room to move while also meeting your goals at the same time.

1. Income

A good budget should include your monthly income.

This includes all current sources of income, so track all incoming profits such as:

Paychecks
Interest (like interest from savings accounts)
Bonuses and commissions
Dividends (such as from stock market investing)
Income from side hustles like babysitting or selling your clutter for cash

Basically, if you are earning or receiving money in any capacity, take note of it and add it to your income category.

2 Monthly bills and expenses

Next, a good budget should include your monthly bills and expenses.

There are two kinds of monthly expenses:

Fixed expenses – expenses that are paid once per month at roughly the same cost (mortgage, rent, insurance, property taxes, phone bills, etc)
Variable expenses – expenses that you incur several times per month, and at varying costs (buying groceries, eating out, going to the movies, shopping for new shoes, hosting a birthday party or barbeque, etc.)

One of the most common reasons that budgets fail is because people have no idea how much money they spend each month.

If you are new to budgeting you should track all your expenses for 30 days — one full month — so you can see where every penny is going.

Fair warning: if you haven’t ever added up your monthly expenses, you may be a bit shocked – I know I was when I saw how much we were spending on groceries!

Your monthly budget expenses should include:

home expenses – mortgage or rent, electricity, gas, water
car-related expenses – gas, oil changes, maintenance, tires, etc.
food – eating out, groceries
debt payments – whether you want to pay the minimum or over, take note of your credit card or loan payments
child-related expenses – daycare, tuition, hobby/sports fees
personal expenses – clothing, haircuts, gym fees
work expenses – monthly dues, staff lunches, etc.

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3. Special occasion expenses

Special occasion expenses are expenses that won’t be incurred this month but that you need to plan and save for in the future.

While you aren’t paying for these expenses this month, if you plan ahead, you can save yourself time and money by allocating money early for upcoming expenses.

Savvy budgeters who plan ahead for Christmas are already setting money aside in January!

Some examples of upcoming expenses are:

Christmas money
Birthdays
Taxes
School fees
Membership fees/dues

4. Savings

You also need to include savings in your budget.

This amount will be larger or smaller depending on your income, and that’s ok.

Just try to put something into your savings account every month if you can – this can be a normal savings account, a high-yield savings account, a Roth IRA, your 401k, or any combination thereof.

5. Fun Money

Finally, you should always include some fun money in your budget.

Remember the jeans example?

If your budget is so tight that you don’t give yourself fun money, you’ll be less likely to want to stick to it – like a bad diet.

Emotional motivation is everything with budgeting.

When you feel like you can win, you will!

How much fun money should you budget? Well, that depends on your income and expenses.

Keep reading and I’ll show you how to set up a budget as a beginner. I’ll even share ways to bring in more income and cut costs too.

A woman smelling a yellow flower in a field

How To Budget As A Beginner

Here is your budgeting 101 crash course – all the things you wish they had taught you in school instead of how to play Hot Cross Buns on a recorder.

Even if you think you suck at budgeting, by the end of this guide you’ll know what it takes to make a budget that actually works for you.

1 Set Financial Goals

Before you even start creating a budget, you need to set some big-picture goals.

If you are married or have a partner, then this should be a group project; the family that plans together, wins together.

What are some things you really want or need to save up for?

Here are a few examples of budgeting goals:

Wedding – smart budgeting helped me save $30k on our wedding at a time when I was also paying off 25k in student loans
Retiring early – have you ever heard of the FIRE movement? We are working on retiring early and saving between 50% – 70% of our income each month
College
Pay off debt (we paid off $250,000 of debt in 5 years)
Buy a car
Buy a house
Go on vacation

2 Write Down Your Income

Next, write down your total income for the month.

This is literally the amount you have to spend, so keep it somewhere visible.

When you look at this amount do you feel your income is a little, err, on the light side?

In the end, you can only cut so much money from your budget – any personal finance guru worth their salt will tell you the fastest way to reach your financial goals is to increase your income while sticking to a budget!

If your income falls short of your goals, here are some quick and easy ways to increase it ASAP:

Ebates – this sweet and easy app earns you cashback from making online purchases. Sign up FOR FREE and get $10 back instantly when you spend your first $25 – you can even refer family or friends and make $25 for each referral!
eBay – You can earn an extra $1,000 a month by selling items on eBay.
SurveyJunkie – You literally earn money by taking surveys – it’s better than taking a Buzzfeed quiz and because you are getting paid for it!
Swagbucks – This is another way to earn cash back on purchases and they also have surveys you can take for extra money too. Find out how to get free gift cards for your favorite stores like Target, Amazon, or PayPal cash!
Rover – Love animals? Why not get paid to walk or pet sit them as a cozy and fuzzy side hustle?
Sweatcoin – Sweatcoin is a cool new app that literally pays you to walk. You earn Sweatcoins (the currency the app uses) that you can trade-in for gift cards, products or donate to charity. You can even earn a brand new iPhone 11 or $1,000 cash with PayPal!

3 Record Your Regular Expenses (Bills)

This part will take the longest, but it’s so eye-opening.

Put your expenses into categories (like we did above) and look at how much you spend.

Now, look at how much you are spending on things you can control, like food, gas, and entertainment.

Use these amounts to plan for the upcoming month.

Don’t forget, you can always use this complete free Monthly Expense Tracking Printable, which has all the categories already on it.

4 Put Money Into Savings

Don’t forget this step!

You will appreciate it if your car breaks down or you need a new roof.

Include some sort of savings amount in your budget, even if it seems small. Ideally, you should put a portion of your monthly income in savings first before using the rest for expenses and needs.

5 Take Out Money For Future Expenses

You should also try to put aside money for future expenses if you can.

That way, when taxes or an oil change comes up, you’ll have the money available.

Some people like to add up all of their seasonal/irregular expenses and then divide by 12. Then, they put that amount into savings so it’s ready for the next year.

If that’s too restrictive, you could also just try to make sure you have the money in your savings when you need it.

6 Give Yourself Fun Money

Go back over the previous month and add up how much you spent on entertainment, lattes, and anything that isn’t a “need.”

(These are things that you really enjoy but if you don’t do won’t affect your health or regular expenses.)

See if you overspent and then try and cut the cost accordingly; see if you can reduce by 25% or 50% – you still can have some “fun” without being wasteful.

If you discover that your income won’t cover it, you can either try to cut costs further or pick up a side hustle to make more income.

7 Look For Ways To Save Money

Now, add up all your expenses and subtract them from your income.

Do you have money left over?

If not, then you’ll need to look at ways to cut back in a few areas.

Here are a few ways my family saves money every month:

Eating $1, $3, or $5 meals at home
Saving cash with our a minimalist lifestyle

A hand holding cash for envelope budgeting

Track Monthly Expenses With These Budget Apps

If you prefer to go paperless, there are lots of cloud-based apps that you can use on both your computer and your phone.

They are all very different, but they all track your expenses and help you stay within your budget.

Here are the most popular budgeting apps:

Mint – It has gorgeous graphics and tons of features. Plus, it’s free!
YNAB – You Need A Budget has a small fee, but it’s great if you are sharing with a partner.
PocketGuard – It is stupid easy. It shows you at a glance how much money you have on all your cards and how much money you currently have available to spend.
GoodBudget – This is an app that uses the envelope system to show you how much you can spend in different categories.
Charlie – This app is so cool! It talks to you via text messaging, showing you how much you can afford to spend every single day and how to save money on current bills.

Budget In A Way That Makes Sense to You

The most important thing about budgeting is that you make it work for you and your partner.

I hope this guide helped you out!

If so, feel free to share it with your friends or save on Pinterest to read again!

How to Budget Your Money Like an Expert