A Beginner’s Guide to Budgeting – Budget Template Included

monthly budget with budgeted and actual amounts of money spent

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Are you looking for a guide on how to budget for beginners? 

You’ve come to the right place. In this post, I’m going to focus on creating a budget and answering some common questions that both beginners and people who have been budgeting for years may have. 

Budgeting can help you see where your money is going and where it’s coming from and help you make sure that you have money set for everything needed and things that you want.

For the example included in this article, we’ll use Google Sheets, and I’ll provide a template that you can use for your own home budgeting needs.

My wife and I began creating annual budgets from the time we got married in 2007. Each year, we often found ways to save money every month and better have an idea of what our money situation was like at any given time. This has given us peace of mind as it’s helped us save and invest for the future, as well as pay off debt.

Let’s jump right in!

What is the Importance of Budgeting?

Budgeting may seem like a way to be restrictive with your money, but budgeting actually has many benefits that will help you in the long run, making your money less restrictive. Whether you’re a beginner creating a budget or have created budgets for years, there are many benefits for budgeting.

Here are some key benefits of budgeting and why it’s important:

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Budget your money and track your spending with this fully responsive budget spreadsheet.

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  • Budgeting helps you stop overspending. When you have a budget, you can see right in front of you where to allocate your money each month, and you’ll know how much money is available to spend. Overspending makes it harder to save for the future and can make it harder to pay off debt.
  • Budgeting helps you reach your money-saving goals. With a budget, you can set up weekly or monthly savings, which can be placed in an emergency fund or invested in a brokerage account, for example. 
  • Budgeting can help reduce overwhelming feelings about your money. For many, money is a sensitive topic, and it can feel overwhelming at times. When you budget, you know where your money is going, which means there’s fewer surprises at the end of each month. 
  • Budgeting can help you pay off debt or avoid debt in the first place. Overspending can cause people to go into debt. When you have a budget, you get a clearer picture of your financial situation, which can help stop you from buying things you can’t actually afford. When you stop buying things you can’t afford, you’re less likely to accumulate debt, which will help you build more wealth long term.
  • Budgeting prepares you for emergencies. You may have had one or more large unexpected expenses come up at some point in your life. This may have been a car that broke down, a trip to the emergency room, or missed days at work that caused you to lose some pay, as some examples. When you budget for unexpected expenses, you’re more likely to have a cushion for when these events occur, which will help prevent you from having to use your credit card and sink into debt.

What Items Should Be Included in a Budget?

Here are some common items that should be included in a typical budget.


Listing out each source of income will help you figure out how much money you have coming in each month. If some of your income is variable, then putting in an estimate is fine.


This is the most important part of your budget. This may be your largest expense as well, and it’s what’s keeping a roof over your head, making this item the first item you’ll want to budget money for.


Groceries come up as another important part of your budget as you need to eat to survive. It is typical to budget $175 to $345 per adult per month, according to OneMainFinancial.com

Property Tax

Homeowners will likely pay property taxes each year on their homes. If you have a mortgage, you may have your property taxes escrowed into your mortgage payments.

Health Insurance Premiums

You may have health insurance through the Marketplace or through work. Health insurance premiums can get costly, and having health insurance is vital if you get sick or injured.


Utilities are one of your most important expenses as it generally covers electricity, heat, and water. When making a budget, separate each utility into its own expense.


Having internet has become more vital over the past several years, and some people could argue that it’s tough to live without internet. If you’re living on a tight budget, purchasing a lower internet package to save money each month may make sense.


Mobile phones, and sometimes landlines, are an expense that most people must budget for.

Auto Insurance

If you own a car, you will most likely have auto insurance and include it in your monthly budget.

Auto Loan Payment

If your car is currently financed, you’ll want to have a budget item for your auto loan monthly payment.


Gasoline prices change regularly, so when writing in your fuel budget, it’s recommended to use a slightly higher than average amount of consumed fuel for the month. So if you normally spend $100 per month on gasoline, you may want to budget $120 for price and usage fluctuations. 


You may take a train, subway, or bus to and from work or various places each week. If you use transportation frequently, add your monthly ride costs in this section of your budget.


Your clothing budget should include how much you’re spending both on clothes for personal and business use as well as clothing cleaning services, such as dry cleaning. It makes sense to separate these expenses into two categories if you frequently buy clothing and use clothing cleaning services.


Entertainment refers to anything you do for fun. You can separate entertainment into subitems like books, computer games, drinks, movies, and so on.


Subscriptions include anything you pay the same amount for each month. This can include a gym membership, beauty boxes, website dues, and anything else you pay a monthly subscription for that doesn’t fall under another category.

Household Maintenance

Things break around the house periodically. It’s always helpful to have some money set aside for household maintenance. You can also include cleaning supplies in this area of your budget.


If you’re into gift-giving around the holidays and birthdays, or any other time for that matter, having a gift budget makes sense.


Any donations you make to charity each year can go into your monthly budget. If you donate $480 per year to charity, for example, you could write in a $40 monthly donation budget.

Doctor Visits

Most people get a physical every year and may also see specialists for various routine care. Keeping track of your average spending at the doctor’s will help you budget for your annual visit expenses. 

Common Daily Spending

Many people spend a little bit of money every day. This could include coffee money, lunch at work, a snack from the gas station, or any other small daily purchase.

Car Registration

You may need to register your car annually, and having a budget for this is helpful so that you’re not surprised each year. If your car is $120 to register, then adding a $10 budget each month to this expense makes sense.

Pet Care

Cats, dogs, and other pets need food and regular checkups. Having pet care in your budget will allow you to put money aside for your furry family members.


Prescription medication can be life-saving, so it’s important to have money set aside each month to pay for any medicine that your doctor prescribes to you.

What Should You Do Before Beginning to Design Your Budget?

There’s a few steps you can take before creating your budget to help the process move smoothly. 

Figure Out Your Net Income

By figuring out your net income, you’ll know exactly how much money you have to work with each month. Your net income is the amount of money you make in a month minus taxes, deductions, social security, and any 401(k) contributions you might make. 

Once you get your net income figured out, add it to a worksheet and move to the next step.

Track Your Spending and Calculate Your Expenses

After determining your net income, you’ll want to track your spending and expenses. You likely use a credit card, debit card, and/or checking account to pay for most of your bills and expenses. 

Check your statements and create a list of each expense and how much you pay, on average, each month for these expenses. If a specific expense varies greatly each month, consider using a 3-month or 6-month average. 

Determine the Difference Between Your Spending and Your Income

Once you’ve determined your income and your expenses, you can subtract your expenses from your income to see if you’re saving money each month or losing money each month. If you’re losing money each month, you have a few options.

  • Cut back on discretionary spending: Look for spending that you categorized as fun money, entertainment, or any other optional expenses. This could include eating out, daily spending, or canceling subscriptions you’re not using as much anymore.
  • Look for ways to cut back on required expenses, such as common monthly bills. Check out this guide on how to lower household bills.
  • Make more money: Consider picking up a side hustle or looking into ways you can earn more money at work. Negotiating for a raise might be something worth pursuing.

How to Set Up Bank Accounts for Budgeting

There’s no right or wrong way to set up your bank accounts for budgeting, however, here are some accounts that may help you the most.

  • Primary Checking: Where all of your income comes into, and money is paid out.
  • Reserve Checking (optional): A second checking account where you keep money in case one month’s expenses are much higher than usual. This account could contain 30 days of estimated expenses in case variable expenses are high one month.
  • Emergency Fund: Where you have between three and six months of living expenses saved up in case something goes wrong, like sickness, injury, or a broken-down car.
  • Retirement Account: Where you have money invested for retirement. This could be a Roth IRA or 401(k), for example.
  • Vacation/Travel account (optional): Money you save for annual travel and vacation expenses. Check out this guide on how to save money on travel.
  • Splurge Fund (optional): For you or your family, this is money that you can spend without thinking twice about. 

How to Make a Budget in Google Sheets

I’ve made a budget in Google Sheets so that you don’t have to. This beginner budget template can be used by new budgeters and veterans alike. Download the spreadsheet here. Once it arrives, click File and Make a Copy to create a version for yourself. You can also download the budget into Excel if you’d like.

To create your budget with this sheet, start filling in each section as it fits your situation. Use your paychecks and/or bank statements to determine your total monthly income. From there, determine your expenses and enter them.

You’ll see that the sheet updates your annual costs automatically when you enter the monthly values. You’ll also see in the upper right that you can see your total monthly income and your estimated annual income, should all months be the same.

Using this summary section, you can get a rough idea of what your monthly and annual cash flow is. 

It’s great to have a visual of your budget, and this budget spreadsheet template updates as you go, saving you from having to do the math for yourself, or from having to erase totals whenever you change an item.

How to Use the Envelope Method to Budget Expenses

The envelope system in budgeting is when you create physical envelopes to hold money for various expenses. The envelope system is great if you have a tough time controlling your spending or if you don’t trust yourself with a credit card.

Say, for example, you don’t want to spend more than $100 in a month on lunch at work. You would place $100 in an envelope marked, “lunch at work”, and only use the money in that envelope to buy lunch at work. 

If you run out of money in that envelope before the end of the month, you would no longer be able to spend money at work on lunch until next month. 

Using this method, you can classify all of your discretionary expenses in separate envelopes. Alternatively, you can put your “needs” in one envelope and “wants” in another.

How Much to Budget for Fun Money

Determining how much to budget for fun money depends on how much you’re saving each month and what your savings and investing goals are. People who are trying to reach financial independence while young may purposefully invest a large amount of their money while having less fun than the typical person. They trade this for having more fun later in life. 

A typical person might budget up to 30% of their income towards fun money or general discretionary expenses. In the end, the amount of money you budget for fun will be based on how much money you’re spending on required living expenses and how much you choose to invest for your future each month.

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Is Budgeting a Waste of Time?

Some people on the internet will tell you that budgeting is a waste of time, and closely monitoring your finances can be draining.

So then you might ask yourself, “If I budgeted $100 for fun money but spent $120 by accident, did I screw up? What was the point?” 

No, you didn’t mess up at all. Budgeting isn’t about restrictions; it’s about freedom. When you budget $100 for fun money but go over, you don’t beat yourself up over it. Instead, you realize that sometimes things won’t line up exactly, and you remind yourself that budgeting helps you get an idea of where all of your money is going and isn’t always a strict and draining way to run your life. 

Many people who budget end up saving thousands of dollars per year. Does this sound like a waste of time to you?

Wrapping It Up

Budgeting is a fantastic way to have a clearer picture of your finances. In this beginner’s guide to budgeting, you’ve learned how to get started with your own home budget. 

How much money have you saved as a result of budgeting? Let me know below in the comments!

2 thoughts on “A Beginner’s Guide to Budgeting – Budget Template Included”

  1. Really nice article. I am using spreadsheet to track my expenses in blogging. Till now I didn’t create a budget specifically.. Thanks for the info.

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