Simple Budgeting for Beginners — Bromley Financial Coaching (2024)

Start by making a list of all your income. This includes employment income, government grants, side hustle money, cash from selling things, birthday gift money from your grandma. Any money coming your way.

Make a note of which day of the month you will receive this income. For unexpected income, like a gift, you can add that to your spending plan as you go. We don’t want to assume a gift and decide where we’re going to spend it, only to find out that gift isn’t coming.

Your needs are anything that you require for safety, security, and productivity. This starts with shelter, food, and transportation, but can also include some other expenses that provide for productivity.

Your housing should include expenses such as mortgage/rent payments, home insurance, utility bills, and property taxes.

Your food needs are essential food. I am talking about your necessary groceries, not snacks in the checkout line or takeout food stops.

Your transportation needs are expenses you require for getting from A to B, such as car payments, car insurance, maintenance, fuel, Uber money, bicycle maintenance, or a bus pass.

Lastly, list anything you need for productivity; within reason of course. That might be internet, a cell phone, or work clothes. By “within reason” I mean, you don’t need the newest cell phone to be productive. A working cell phone that does the job is your need, not the newest iPhone. Same with work clothes; if you have perfectly fine work outfits already in your closet, you don’t need to plan for more in your needs budget line.

Now that you have covered your needs, it’s time to get rid of what is holding you back, eating up your income, and keeping you up at night… debt.

There are a couple of mindsets that you need to set here to be successful. First, believe that you can get through this week, month, year, forever, without using credit. Use cash or debit to do your spending. Next, be done with using debt as a convenience. If you’re living within your means, you don’t need to use debt to buy things. If you can’t afford that vacation, new jacket, or even your cable TV, don’t buy it. If you don’t discipline yourself to live within your means, no one else is going to make you. As a matter of fact, if you’ve turned on the TV at all lately,you’ve seen that marketing is intended to convince you to keep using debt.

Now that you’ve changed your mindsets on debt, let’s get rid of it. After you have covered your necessary expenses, put extra money in your budget toward debt repayment so that you can remove debt from your budget once and for all. This might look like doubling your minimum debt payments, using half of what’s leftover after your needs and future savings are covered for your wants and the other half gets put toward attacking debt, or better yet, going all in and putting everything extra toward your debt. Whatever you decide to do, just don’t keep making minimum payments on your debts. This is not how you are going to get traction and get out of debt. The more money you can focus on your debts, the quicker they will be out of your life.

Your future needs are areas where you are saving for your future that will provide you security and keep you out of debt; an emergency fund, retirement savings, and education savings are good places to start.

Before you jump ahead to the next step (your wants), make sure you have money going toward future savings. Something like an emergency fund has a set end amount, but retirement savings you should be putting money toward regularly until you reach retirement age. Your savings strategies for something with an end amount will be temporary whereas savings for retirement should stay in your budget for your entire working life.

Your wants are anything that is not necessary for your daily living, security, and productivity. Some wants that you may have could be vacation savings, extra clothing, takeout food, extracurricular activities, a gym membership, tv subscriptions; the list could go on.

After you have accounted for your needs, paying off your debt, and saving for your future, now plan for your wants. At this point in your budget - after accounting for needs, debt repayment, and savings - you may have way more than you anticipated having left over, or you might realize that you don’t have much or any atall.

If you have money left over to budget, woohoo! Be smart. You don’t necessarily have to spend every extra penny on wants. Consider putting some aside toward future goals that you have. It’s okay to treat yourself, especially if you’ve worked hard on getting out of debt or saving an emergency fund, but assess your goals and decide how much is appropriate for treating yourself.

If you have nothing left over in your budget for your wants, don’t get discouraged. Remember that this is temporary. Once you have your debt paid off and an emergency fund saved, you will have more room in your budget for the things you want. If it helps you stay motivated, it’s okay to pick a small want that you have, maybe it’s buying a Starbucks coffee once per week, and give yourself a budget line for this treat while you still work hard at paying off debt and saving.

Your budget needs to be zero-based, meaning that your income minus your expenses must equal zero. ”But what about money for savings?” you ask. Savings must be included as a budget expense line. It’s common for people to think that anything left over will go into savings but you want to plan your savings into your budget.

If you are spending more than you are making, and you budget is not zero-based, you have two choices: make more or spend less. Start with looking where you can cut back and then consider ways that you can make more money.

If you are spending less than you are making, you need to go back to your budget and allocate any left over funds. Here’s why: if you don’t tell your money where to go, it’s going to disappear. You will spend it somewhere on something you probably did not plan for. So, whether you put it toward savings or give yourself more money to spend on wants is entirely up to you. Just make sure that you allocate every dollar and cent.

For as long as I can remember I have budgeted. I am a math nerd so budgeting satisfies my joy of using numbers. When I started budgeting I created a budget based on my usual spending and perceived needs, and then copied it every month. It wasn’t until we started making a new budget every month that there was a significant change in our finances. I cannot even begin to emphasize how drastically our money started to be more efficient, effective, and impactful. It was no longer spreading too thin.

When you create a new budget every month, many things will likely stay the same, but there will always be some variable areas that need adjusting.

I am all for creating sinking funds where the savings amount is the same monthly, for example, saving $100 per month so that you have $1200 for Christmas by the time December rolls around. But the reality is, that can spread you too thin in some months and impede your current planning. Each month you need to determine what your immediate and upcoming needs are and plan for those before you plan for something several months away.

Whether this is your first try budgeting or you’re just looking for some tips on budgeting to see if you can be more effective, with these simple steps, you can be confident that your money is doing what you want it to. Budgeting can be simple and effective if done right: list your income, allocate to the four categories in order: needs, debt, saving and wants; make sure you have a zero-based budget, and repeat!