PeopleImages/Getty Images Budgeting 101: Learn the Budgeting Basics Share Flip Pin Email By Miriam Caldwell Updated August 07, 2017 Budgeting is the primary way that you can take control of your finances. Simply put, a budget is a written plan for how you will spend your money. You can create a monthly or an annual budget. The budget allows you to make financial decisions ahead of time, which makes it easier to cover all your expenses throughout the year. Budgeting consistently can help you turn your finances around and begin to build wealth. Why Is Budgeting Important?A budget a powerful tool because it allows you to determine how and where you want to spend your money. When you master budgeting, you make sure that every dollar is being used how you want it. If you have a budget, you can track your spending and determine if it is matching your priorities. Often when people start budgeting they are surprised to see how much money is going to things that are not important to them, like eating at fast food restaurants or paying for conveniences. Budgeting allows you to monitor your progress on goals and make sure you are sticking to your financial plan.How to Set Up Your BudgetSetting up a budget is a straightforward process. It helps to have a list of the bills that you must pay each month as well as your expected income. If you have not budgeted before, you can start by looking at your past three month’s expenses. Using your bank statements to break these into categories. If you have budgeting software, you can upload your statements and use the software to start to sort them. Article 5 Budgeting Myths You Should Ignore to Succeed UP NEXT in Budgeting and Personal Finance By Paula Pant Read Article Begin by listing your income for the month. This should include any paychecks you receive, as well as income from other sources like child support or investments. If you have a business, you should include the amount that you pay yourself out of the business each month.List your expenses starting with the most important to the least important. Listing the expenses in order makes it easier to make cuts in your budget if needed. The most important should be things that cover your necessities. You will need to cover your housing, food, utilities (not including cable television), transportation costs, debt payments, and savings goals first. Then you will list luxury items which can include clothing, entertainment, eating out and gym memberships. Once you have a list of your expenses and your income, you will need to compare the two numbers. Your expenses should less than or equal to your income. If you have additional money after you plan your budget, you can add it to the categories for your financial goals like getting out of debt or building an emergency fund. If you have more expenses than income, you will need to find ways to cut back on your expenses. Start by cutting money from your categories in the luxury section of your budget. You can also work on ways to increase the amount you earn.You will need to track your spending and stop when you have reached the limit in each category. This is when you start budgeting. If you do not stick to your categories, then you will not stick to your budget. If you end up spending more in one category than you had planned, you can transfer money into that category to cover it from another category. For example, you budgeted $2,000 for food for one month and you ended up spending $250, then you can move $50 from your entertainment category to cover it. In order to do this you will need to check on your spending every day to see how much you have left. Article How Much Do You Really Earn Per Hour? UP NEXT in Budgeting and Personal Finance By Paula Pant Read Article Finally, do it again. After you have completed your first month of budgeting, it will be easier to plan for the next month. At the end of the month look at how you spent and make adjustments for categories in which you spent more than you planned, and cut back on the categories that had additional funds in them. Different Budget TypesThere are different strategies when it comes to budgeting. The strategies are designed to help make budgeting easier overall. Every person is different and one strategy may work better for you than another strategy. Reading about the different strategies can help you determine the best budgeting strategy for your personal situation.Envelope Budget: An envelope budget is a budget where you assign money to each category and deal with cash for several of your expenses. You take the cash out for each month and put the money into different envelopes labeled for the category. When you run out of money in that category, you stop spending. This is a good strategy if you are not good at tracking your expenses. Most people still pay their bills online through their checking account. In order to make this work, you cannot use your debit card for the categories that you have envelopes for. 50/30/20 Budget: The 50/30/20 budget helps you determine how much you should be spending on different categories. It can help you focus more on your financial goals. Fifty percent of your after-tax income is to be spent on your needs. The needs are things like basic food (this does not include eating out), housing, transportation costs, and utilities. Thirty percent of your income is to be spent on your wants. This includes your entertainment costs, eating out, gym or club memberships, cable television. Twenty percent should be spent on savings and debt repayment. The savings can include things for your goals like buying a home or retirement.Zero Dollar Budget: A zero-dollar budget is when you plan how you are going to spend your income down to the last penny. This budgeting theory helps you to plan effectively and get control of your spending. Since it includes planning for saving money, you can begin to gain traction. It also makes it more important to monitor your budget regularly.5-Category Budget: The 5-Category budget sets up five basic categories and determines the percentage that you should spend on each. For housing, you can spend up to 35 percent of your income. For transportation, you should plan no more than 15 percent of your income. For other living expenses (such as groceries, utilities, and wants), you can spend up to 25 percent of your income. For savings, you should set aside ten percent each month. The last category is debt payoff, and it should be 15 percent of your income. Article Why Should You Bother to Budget? UP NEXT in Budgeting and Personal Finance By Paula Pant Read Article Tricks to Make Budgeting EasierMany people balk at the idea of budgeting. It is a lot of work to track your expenses. It can feel restrictive to limit spending. It may cause fights in your marriage if one or both of you blow a category one month. You will need to find ways to make budgeting easier. The first two or three months of budgeting are the hardest as you adjust categories and work on cutting your spending.Find budgeting software or a budgeting app that will work well for you. Online software like You Need a Budget (YNAB) or Mint will import your transactions for you and make it easier to assign categories, adjust the amounts for each and track your spending for each. YNAB has a mobile app that allows you to access it on the go so you know exactly where you are and you can enter transactions you make them.Consider switching to cash for problem categories. This works well for mostly discretionary things like your fun money for the month, lunches out at work and your clothing or entertainment categories. It can be used for groceries and other spending, too.Take the time to check on your budget each day. If you do this, it should only take you about five minutes in the morning or evening to look at your spending and have a good idea of how much you have left for the month. It can keep you from making a mistake or overdrawing your account.Work on finding ways to save on your budgeting categories. The more money you can save on your daily expenses, the easier it will be to stick to your budget. You can use strategies to save on your groceries, save on your utilities and even on your insurance. Shopping around for the best deals can make budgeting less stressful.Make budgeting as automatic as possible. Scheduling payments to come out automatically on your pay day is one way to do this. Another option is to transfer money into savings automatically. Allowing your budgeting software to do a lot of the work as far as categorizing and recording your transaction can also help.Keep learning about budgeting. There are classes in your community and online that can teach you more about budgeting effectively. There are also classes on couponing and other money saving strategies that can make sticking to your budget easier.