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How To Start Budgeting For The First Time, According To 2 Money Experts

I’ll be honest: I’ve never been the best at budgeting. My process for tracking my spending has essentially just been checking my bank account every few days to ensure I haven’t gone off the rails. Plus, I’ve been lucky enough to rely on funds from previous jobs to help me get through, and I’m able to receive support. 

But before you close this tab, wondering why you’re reading an article about finances from someone who knows nothing about it, let me explain. Recently, after noticing my funds plummeting from my semester abroad, I decided it was time for me to start budgeting. But, like many other college students, I had no idea where to start. I mean, it’s not like we’re taught how to budget in high school. That’s why I decided to speak to two experts, certified financial planners Sarah Gerber and R.J. Weiss, to figure out exactly how to create my first budget

So, if you’re like me, and know you should probably start budgeting but you’re too afraid to actually do it, you’ve come to the right place. I asked Gerber and Weiss all the stupid questions about budgeting I could think of in an effort to create this fool-proof guide for my fellow money management newbies. Here are the best tips they gave me.

Evaluate what’s coming in and what’s going out.

The first step of budgeting is to figure out exactly how much money you need and how much you make. Before delving into the more specific aspects of budgeting, jot down the money you have coming in. “Start by listing any income sources,” Weiss says. This can include any part-time jobs or allowance you get from a parent or guardian. Of course, if you aren’t making money right now, skip this step and come back to it when you do have income.

From there, figure out your essential costs. What are your monthly bills? What are necessary purchases, and what can be cut down? Of course, this may seem like an obvious question at first, but you never really know until you sit down and look at the facts — and in this case, that means taking a look at your spending.

“Review your past three months of spending. This will help you get a sense of where you’re currently at,” Gerber says. “The last thing you want to start with is something that you can’t stick to. Three months is also much better than one month because there’s almost always some kind of large expense in a given month and you really want to be honest with yourself here.” 

Sure, this may mean drawing attention to cringe-worthy, avoidable purchases, but hey — that’s the whole point of budgeting. Only then can you move on to actually creating a plan.

Categorize and establish monthly goals.

Now, you’ll likely have a bunch of overwhelming information from your previous expenses, and you’ll probably be a bit lost at how to manage all of these diverse purchases. Categorizing is the best way to get a handle on each type of expense.

But before breaking your payments down into specific groups, note that there are two types of expenses: fixed and variable. This sounds complicated, but don’t worry — it’s actually pretty simple. “Next, list fixed expenses, such as rent, car payments, and insurance premiums. These are expenses one must pay every month and don’t vary much in amount,” Weiss says. “Then, list variable expenses, such as groceries, gas, and entertainment. These expenses can vary monthly, depending on spending habits.” This way, you can recognize the funds that will change each month, whilst leaving the fixed payments consistent.  

Now comes the moment you’ve been waiting for: Deciding on a budget. “Once you have a good handle on income and expenses, create a budget by allocating a certain amount of money to each category of expenses,” Weiss continues. Depending on your lifestyle, some examples of categories are food, academics, transportation, and personal. 

Remember to distinguish between your necessary expenses and your non-essential ones — for example, it’s probably wise to designate a larger sum of money toward groceries as opposed to new clothes. Use your judgment, but also keep your habits and preferences in mind. And as the months pass, you’ll be able to modify and tighten up your goals.

Track your spending.

You don’t have to track your spending on your own — there are so many tools available for you to try, which will help you track and stay organized. Microsoft Excel and Google Sheets are popular, but there’s no single solution. Hell, you can even use your Notes app if that’s what works for you.

Gerber recommends checking out some spreadsheet budgeting templates, which can be the easiest way to track your spending because you can tailor your spreadsheet exactly the way you want it. She also notes that Mint and YNAB (You Need A Budget) are good alternative options. “They all tend to have something that might make them not quite right for someone, so it takes some experimentation and iteration here.”

Weiss agrees that Mint is an effective tool. “It’s free. It’s the ideal app simply for tracking your income and expenses. YNAB is a bit more hands-on and comes with a monthly cost, but it can help keep expenses low,” he says.

Try out different templates and apps, and choose whatever works for you. If you’re like me, you’ll probably spend too much time looking for the perfect fit (and the most beautiful color scheme) — but don’t overthink it. “Keep it simple! You don’t have to get fancy right away,” Gerber says. “Sometimes, a simple spreadsheet or list of transactions is all that you need, depending on the issue you’re trying to solve.”

Leave room for error.

Like with anything, you’ll flub up sometimes — so keep that in mind, and don’t be too hard on yourself when the time comes. Your expenses can and will fluctuate based on the time of year. For example, you may need to designate more money toward buying Christmas presents in December, textbooks in September, or even a Halloween costume in October.

The point is: Don’t be too hard on yourself. “Give yourself grace! Expect to go through adjustments. Give yourself room to experiment. You aren’t going to find something that works perfectly for you in month one, and it’s going to take some time to adjust,” Gerber says.

Of course, you won’t be perfect at budgeting right away, and you’ll make mistakes, as with any new activity. But remember that with time, you’ll get better at managing your spending. “Budgeting is a skill that takes practice to learn. So, don’t expect everything to go 100% perfect the first month or even a year,” Weiss says. “It will take time to learn, but if you stick with it, eventually, you’ll come upon a system that works for you.”

Reward yourself!

I know it may seem unnecessary, but it’s also important to acknowledge yourself for taking this step — it’s not easy to manage your finances, especially on top of all the other stresses we have to deal with (ahem, finals, I’m talking to you). Rewarding yourself doesn’t need to mean dipping into your savings to buy yourself something fancy — there are other ways to acknowledge your sacrifices.

One way to give yourself some credit is by tracking your non-spending as well. “People forget about all the micro-decisions they make during the day and how often they think about spending on something but decide not to,” Gerber explains. “My clients love doing this because it’s so great to be able to give yourself credit for this kind of inaction that you could really overlook otherwise.”

Along the way, you’re going to face missteps and catch yourself buying something you shouldn’t — but that’s OK! After all, we are college students, so we’re supposed to make mistakes. Just taking the time to learn about budgeting and being conscious of your purchases is a step in the right direction. You’ll thank yourself later on, when you can use the money you’ve saved for something more exciting than a daily $5 latte.

Hey! I'm a third-year Global Business & Digital Arts student at the University of Waterloo, a National Writer for Her Campus, and the Editor-in-Chief for HC Waterloo. When I'm not writing, you'll probably find me reading the newest Taylor Jenkins Reid book, watching The Office, or eating pizza.