Let us guide you through the whole process with our beginner budgeting guide: practical info, no headache. Let’s unlock the mystery of budgets together, shall we?
“The best way to stick to a budget is to start one.”
Thanks for the advice… but how do I do that?
What is a budget?
A budget is a road map for your personal finances. It is a simple guide that supports your money decisions every day. It takes into account how much you earn and how much you are able (or willing) to spend in a certain period of time.
Basically, it is a limit you don’t want to go over when you spend. A budgeting app can show you how close you are to that limit as you go. In Spendee, for example, you set one total budget for all your expenses and then split it into category budgets. You can also add custom budgets on top, say a weekly budget just for eating out.
Is a budget essential? No. Will it help you move toward your goals faster and more calmly? Absolutely.
Why budgeting is worth it
- You save real money every month
When you know where every dollar goes, you find money you used to spend without noticing. Even small savings each month add up to a big amount over a year.
- You’re the boss
From the moment you start, you are in control of your finances. Knowing exactly what you can spend feels empowering. It can lower your stress, make you more independent and help you get out of debt faster. Your income doesn’t define you. The way you choose to spend it does.
- It’s an opportunity
“Budget” can sound scary, like restrictions, limits and tough rules. Try a small change in mindset instead. If you manage to stick to your budget, new opportunities open up: better financial health, getting out of debt, or even starting to invest.
So how do you begin?
There isn’t one correct way. You just need to start. Don’t wait until your budget is “perfect”. You are already doing well just by learning about it, so keep going.
Everyone wants the perfect budgeting recipe. We can walk you through the options, but in the end you choose what you prefer, tweak it along the way and stick to it.
1. Split your expenses and choose a time period
Your expenses fall into two groups. Fixed ones, like bills, utilities and rent, are usually due once a month. Variable ones, your “wants”, happen more often. Set the length of each budget to match the type of expense. Common time frames are:
- daily,
- weekly,
- every two weeks,
- monthly,
- yearly,
- a custom period.
We recommend a combination of weekly and monthly budgets.
2. Choose how much each category gets
Here is an example. Simon lives in Europe and his take-home pay is 1,800 EUR a month. He wants to start saving, so he puts 360 EUR aside right away. That is 20% of his income. But what does he do with the other 80%?
You guessed it. Simon decides to spend it wisely, with a few budgets.
First, he sets a monthly total budget for the remaining 80%, which is 1,440 EUR.
Next, he looks at his spending and realizes he spends far too much on food. Food is more than one category for him: Groceries, Eating Out and Drinks. So he gives food its own budget and decides to track it weekly, because that is how often he shops.
A common guideline is to spend 10% to 15% of your take-home pay on food. Simon picks 15%, which is 270 EUR a month, or 67.50 EUR a week.
Want to see a similar split for your own income? Try our 50/30/20 budget calculator. If you only know your gross salary, the salary calculator works out your take-home pay first.
3. Stick to the budget
The weekly food budget is set. Now comes the hard part: sticking to it.
Simon shops carefully and follows our 20 tips to save money on groceries. He checks his budget during the week to see how much is left per day.
On the last day of the week, he has spent 48.50 EUR on food. That is 19 EUR under his limit.
First week done!
4. Results
After a month of following his monthly budget and his weekly food budget, Simon has saved an extra 212 EUR: 72 EUR on food and 140 EUR in other categories.
If he keeps this up all year, that is roughly 2,500 EUR extra. And remember the 20% he set aside every month? That adds another 4,320 EUR a year. Together, he saves about 6,820 EUR a year, enough for a nice family vacation with a good chunk left over for savings and investing.