How to Budget for Beginners : The Only Post You Need To Read

May 24, 2019

Today we will talk about budgeting for beginners.


We all hear how important budgeting is. They say if you are truly serious to reach financial independence and early retirement then you need to master the art of making a budget.


A budget is an estimate of your income and expenses over a set period of time. Normally done on a monthly basis, budgets work to:

  • Allocate your salary/income/money wisely
  • Know how much is coming in and going out in your cash flow
  • Identify the areas where you can spend less to save more


Over the years I have developed a love and hate relationship with budgeting. And I can say I am really thankful I chose to still make a budget no matter what and no matter how hard it is.


Budgeting is one financial task we all must do. It is like setting your to do list for a new day, when you make one you are able to define and make a plan on one of the most valuable resources we have as humans – money.




Budget for Beginners


What is a Budget?


A budget is something you every month.


It helps you:

  • see where you spend your money
  • see where you can save money
  • make a plan for how to spend and save your money


And guides you on where you must spend your money less so you can save more.


For example, your budget might show that you spend Php 200 a day just for food allowance at work, including lunch and snacks. This sums up to over Php 4000 a month.


Knowing the number above might help you decide to cut back on lunch and limit yourself to only Php 150 a day (or less). This is an additional Php 1000 savings for you already.


Without a budget it will be hard to know where to save and where to spend. That’s because you are missing the very blueprint of your financial success – a budget.


How to Budget for Beginners


Creating a budget is actually very easy…it is committing to it that’s hard.


Budget involves tough choices to make all ends meet and it is your responsibility to make one. Let’s get started.


How much is your income?

The first step in creating a budget is to know how much your income is. If you are working on a full-time job, this is your salary less deductions.


If you are earning money on the side, you can choose to combine the two income you have and budget. Or you can adopt what I do where all extra income goes in a separate account and treated as opportunity fund.


You can also combine all cash benefits, bonuses, gifts or whatever extra money left from the previous month as part of your income. The key here is to determine what number you will be working on as you budget.


In case you are paid on an irregular basis, you can estimate the total amount making room for adjustments once the actual total income arrive.


What are your expenses?

Now that you are able to determine your income, the next step is to know your budget expenses.


Expenses are of two variants – fixed and variable.


Fixed expenses, just as what we learn in school are those expected bills needed to be paid every month. Your house rent, postpaid phone bill, internet bill even your monthly savings and investments goes here.


Variable expenses, on the other hand, are the complete opposite. These are expenses that can change on a month on month basis such as transportation and food allowance.


It is also important to note that each expenses we have most certainly falls into three different buckets:

  1. Essential Expenses
  2. Financial Freedom
  3. Lifestyle Fund


When we say Essential Expenses these are your necessities, the fixed items that you certainly need to pay no matter what. Example will be your house rent, transportation allowance, food/grocery and/or utilities, electric bill.


Financial Freedom are your savings and investments. These are money meant to help you towards better financial security. Count on here your debt payments, loans, savings and/or investments from different investment vehicles you own.


When we say Lifestyle Fund these are your “flexible spending” meant to pay for things that you personally need like hobbies, shopping and other miscellaneous expenses. Included in this is gym membership, clothing/shoes shopping allowance, etc.


As you write down both your fixed and variable expenses, try to determine too which bucket they fall under. This is important as you start allocating your income and adjust to your desired budget. More of this in the next section.


What are your spending percentages?


If income is equal to 100%, you need to be able to know what percentage you will give to each bucket.


This is where the 50-20-30 Rule of Budgeting comes handy.


50-20-30 Budget Rule suggests that you essential expenses should be limited only to 50% of your net income. Your financial goals to 20% of your net income and your lifestyle wants to 30% of your net income.


So literally envision a pie cut into three chucks, 50% for your essentials, 20% for your savings and investment and 30% for your other expenses.


What are your financial goals?


The most important ingredient for a successful budget are your financial goals.


You need to have a goal in place as you start a new year or a new quarter which you will then work with as you budget.


Goals help you prioritize what needs to get prioritized. And this is crucial when it comes to budgeting for beginners. You have to be able to allocate your limited money well and fund what matters a lot for you.


Here are examples of financial goals:

  • Be debt-free
  • Save three (3) months worth of emergency fund
  • Build a travel fund


If you haven’t taken a time to think about your financial goals in life, I encourage you to do so today.


Simply think about the person you want to be financially before the year ends. Do you want be free of credit card debt? Do you aspire to have increase in salary? Do you want a savings worth at least a double you income?


Write those down and make sure you have the list every single time you make your budget. These are the needed matters you need to resolve as you begin budgeting for beginners.


Now I’ll show you how to create a budget in five easy steps.




How to Create a Budget in 5 Easy Steps


Step 1. Choose your system


There are different ways you can make a budget.


Are you more of a pen and paper kind of person or you love using budget apps? There are also printable budget templates available for you to download for free.


It can actually be a combination of two systems. I enjoy using Google Calendar for a complete monthly view. I then keep everything on my bullet journal. The key here is to identify and use a system that best applies to you.


Step 2. Record your net income


This is the first thing you need to encode in your budget. How much is your net income. As mentioned above, this will be your take home pay less government fees and taxes. This money will act as your starting point.


Step 3. List down your budget categories


Budget categories refer to the items where you’ll allocate your money. This includes Tithe, bill, house rent, food grocery, etc. It is important to have a the budget category that works for you. Keep it as simple as possible so you won’t go crazy budgeting every end of the month.


Related read: Budget Categories


Step 4. Calculate your spending percentage


I recommend you use the 50-20-30 Rule of Budgeting to calculate how much of your income goes to each category. You can also use other budget allocation depending on your comfort level. If you are curious about the 50-20-30 Rule of Budgeting you can read it HERE.


Step 5. Start budgeting


Put an amount dedicated to each category and stick to your budget. Don’t forget to adjust your budget if needed.


In case your budget revealed that you have more amount set on your expenses than your current income then you need to harshly cut-off on items that can be cut-off.


From coffee dates, dining out, movie times, etc. you have to simply stop for awhile so you’ll have money for more important items. You may also try a no-spend week or month rule where you can’t buy anything and save a ton of money.


During the adjustment you may also want look into where you are overspending. Not all fixed expenses are essential.


For example, Netflix is a fixed expense every month but it falls under Lifestyle Fund. You now have to ask yourself and rate how important it is for you to have access on TV/Movie stream.


If you really want it then the Php 450/month must be paid no matter what. This would mean cutting some things away from your lifestyle fund. Less clothing allowance, less money spent on repurchasing toiletry items.




How to Create an Effective Budget for Beginners


Again it takes a lot of financial discipline to effectively budget your money. But the few items that can help you are as follows:


Put your mind, heart and soul in your spending plan

You need this a lot to succeed in keeping a budget. If you are half-hearted from the start then you’ll certainly fail big time.


Create your financial goals

If you want to stay motivated to save or to invest or to keep your budget then don’t forget to create simple goals daily, weekly or monthly.


Track your expenses from smallest to largest

Once you’ve set up a budget on each category the next big step is to track your expenses up to the last penny. You can do this by a simple DIY Spending Tracker Notebook.


Don’t give up.

Succeeding in keeping a budget is total hard work. You need strong will and financial discipline to stick to the plan. If the budget for the current month failed then try again next month until you find out the perfect budget for your needs.


Final Notes from SavingsPinay

Creating a budget is important for it ensures positive cash flow for you and your family’s needs. Budget also makes you learn to live within your means keeping you out of debt.


Having a budget as a habit will enable you to understand your spending habits or how much you are making and spending. It will also help you stop living from paycheck to paycheck because you have exact allocation of your money.


Lastly, a budget will help you big time in building your savings whether for an emergency fund or retirement fund. The best time to take budget seriously is now. Do not wait for another end of the month or start of the month to create a spending plan.


It is also important to note that you are technically living on last month’s income every time you budget so you have to be able to control your spending wisely.


Do this every month:

  1. At the beginning of the month, make a plan for how you will spend your money that month.
  2. Write what your expected income and  the usual expenses you have based on the last three months.
  3. Write down what you spend. Track every single peso that goes in and out of your pocket. 
  4. Do this every day until a new 
  5. At the end of the month, see if you spent what you are able to follow your budget. Use the information to help you plan the next month’s budget.


I hope you enjoyed this post and learned a lot with the topic. I might do a part two of this in case I really need to update the post or I receive further questions regarding budgeting from others.

Clariza Glino

Izza of SavingsPinay helps Filipinos bridge the financial literacy gap one content at a time by providing insights and tips on budgeting, saving, investing, side hustle and growing your net worth. Aside from this blog she also writes at, a beauty and lifestyle blog for frugal Pinays and manages,, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her at

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