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How to Make Your First Budget in Four Steps

3 min read

Summary: A budget is a plan for the money you have. Here is a simple way to build your first one, step by step.

What a budget is for

A budget shows what comes in, what goes out, and when. It does not need to be perfect or strict. Its job is to help you see your money clearly so you can make calmer choices.

This guide is for anyone who has never made one. You need your recent bank or card statements, and a pen and paper or a simple spreadsheet.

Step 1: List your income

Write down every source of money that comes in. This can be wages from one or more jobs, self-employment, child support or government benefits. Use your take-home pay, the amount that actually reaches you.

Step 2: Track your spending

Look at what you spend in a typical month and sort it into groups, such as housing, food, transport, bills and fun. Receipts and your bank account history make this easier.

If a whole month feels like too much, start with one week. Small daily purchases add up, so write them down too.

Step 3: List your bills and due dates

Many people run short at the end of the month because their bills are due at different times from when their pay arrives. Write down each bill with its due date. Late payments can also cause other problems, such as harm to your credit record.

Put the dates on a calendar. You will see quickly if several bills fall in the same week.

Step 4: Build your working budget

Now put the three lists together. Income goes at the top. Under it, list your spending groups and your bills. Subtract what you spend from what comes in.

• If money is left over, decide where it goes, for example into savings.
• If you spend more than you earn, look through your groups for places to cut back. Start with wants rather than needs.

An example

This is an example with made-up amounts, not a target.

In this example, 300 is left over each month. The person might put 150 into savings and keep 150 as a buffer for things they did not track.

Keeping it going

A budget only works if you use it. These ideas can help:

• Choose a tracking method you will really keep up, such as an app, a spreadsheet or a notebook.
• Look at your spending habits and find a few places to cut back.
• Set a goal and notice your progress.
• Ask someone you trust for support.
• Update the budget when something changes, such as a new job or new costs.

Your first budget will not be exact. That is normal. After a month, compare what you planned with what happened, and adjust.