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You’re tired of your money seeming to disappear into thin air every month.  You don’t feel like you’re overspending, but you never have any money to put into savings.  You need step-by-step instructions on how to create a budget that will actually work for you instead of overwhelming you.  Well, grab yourself a coffee and a notebook, and let’s get started creating a basic family budget.

This step-by-step guide teaches how to budget for beginners, even if you're terrible with money! This beginner's guide to budgeting goes through how to create a monthly budget, where you can cut your spending, how to save on groceries, home, and personal care products, what you can diy to live frugally, and all of the best frugal living tips. Learn how to take control of your money and start saving more and paying off debt. #budget #budgetplanner #money

There are so many different ways to track your budget.  There are apps for tracking spending, envelope systems, software tools, and good old pen and paper.  How do you choose the best way to get started?

I always recommend starting a family budget with pen and paper and transitioning to online tools and apps once you get comfortable with your new budget habits. We have tried several budgeting systems, and I always fall back to pen and paper personally.

What is a Monthly Budget

A monthly budget is simply a plan in which you decide how to allocate your income to meet your expenses.  By creating a plan for where your money goes, you know where you need to make cuts, you know when you can spend on things you enjoy, and you are able to set realistic goals around savings.

All budgets start with tracking your anticipated income, expenses (both fixed and variable), and your savings.

This is easier for some than others depending on whether you have a consistent paycheck or if it varies each month.  If you have consistent income, you can just add up your paychecks each month.

If you have irregular income, then write down your minimum amount of income for the month.  This is the amount you feel confident that you will reach.  Anything beyond this minimum can be planned for once you receive it.

How to Create a Monthly Budget

The goal of a budget is pretty straightforward: spend less than you make and save the rest.  There are other theories on budgeting, but this is the most traditional route for creating a budget.

Grab a sheet of paper or my monthly budget template and let’s get started!

Related: The Budget Binder that Transformed Our Finances

We’re going to start by writing down your dependable family income.  How much do you feel confident that you will earn within the month, whether you receive consistent or irregular income.  Choose an amount that you feel comfortable relying on.

Be sure to include other income you might have from side hustles, part-time work or investments.

Write down the dates that you expect to be paid during that month.  For those with consistent pay, this pay be the 1st and 15th of the month or every other Friday.

Start to list out every bill that you have each month, regardless of how small it is.  I like to separate bills out based on when they are due so that I know which will fall within a specific pay period.

Don’t forget to include things like diapers, haircuts, memberships and other expenses that often slip under the radar but can occur on a monthly basis.

Related: 10 Items You Might Be Forgetting in Your Budget

Be sure to include any other income you might have from side hustles, part-time work or any investments.

If you run your own business, and you don’t have a steady income this part might be trickier.

Free 25-Page Ultimate Budget Binder

Figure Out Where Your Money Goes

This step is crucial to setting up a livable budget for your family.  If you’re not honest about where you’re money is going each month, then you won’t know where you can make improvements.

When we first started budgeting years ago, we created our little spreadsheet, entered all of our anticipated expenses and went about our business.  At the end of the month, we were shocked when we spent way more than we anticipated.  When I combed through our bank statement, I realized that we weren’t really honest about how we were spending our money.

I didn’t include things like iTunes purchases, the number of trips I was making to Starbucks, little toys we were buying our kids when we were out on the weekends as a family, parking fees, and several other things that added up quickly.

We had to really dig in to the details to set up a budget that was honest and livable for us.  My goal is to help get you on the fast track to a successful budget plan.

Three of the biggest things that we did to impact our spending each month was meal planning, tracking our grocery spending, and recategorizing to include miscellaneous expenses.

Related: The Best Way to Track Your Spending: The Visual Method I Use

So let’s talk monthly expenses!

Expense Categories

  • Home: mortgage or rent, property taxes, home or renters’ insurance, home repairs, utilities, HOA
  • Grocery/Food: groceries, consumable home goods, restaurants/eating out
  • Transportation: car/lease payments, insurance, gas, car repairs/maintenance, public transportation, parking, vehicle registration
  • Family Expenses: education/tuition, daycare/babysitting, school supplies, books
  • Health/Medical: health insurance, prescriptions, life insurance, fitness, dentist, private doctor appointments
  • Personal Care: beauty, clothing, haircuts
  • Entertainment: subscriptions, hobbies, holidays, extracurricular activities, vacations
  • Pet Care: pet food, pet insurance, grooming, veterinary
  • Memberships: Amazon prime, Thrive market, Costco
  • Others: gifts, donations

Many of these expenses are predictable and/or fixed amounts. For example, unless you plan on moving to cut your mortgage cost, that amount is fixed each month.

But there are several categories that you can have a direct impact on with careful planning and goal setting…and that’s good news!

Let’s Talk Groceries

Groceries/food is typically the second highest percentage of your expenses after your rent/mortgage, so having an impact on this can be huge on your family budget. I recommend analyzing your grocery spending and dining out for the previous 2-3 months to get an honest number on what you typically spend each month.

Maybe you find that you can afford what you’re currently spending within your budget and you’re happy with it.  Most people, though, will probably be shocked about what they spend versus what they thought they were spending.  I know we were when we sat down to look at the numbers.

If you’re grocery and food spending is more than you can afford within your budget, I recommend setting the goal to reduce your grocery/food spending by about 20%.  I would caution you not to try and make too drastic of changes out of the gate, because it can be really hard to sustain this change.  However, if you absolutely need to cut your spending by greater than 20%, at least you know that now with the numbers in front of you.

We’ll talk about ways to reduce your spending without sacrificing healthy foods.  I personally do not believe in couponing or relying heavily on processed foods to fall within our family food budget.  I’ll show you how we:

Substitutes and Price Reductions

When we first started really diving deep into our budget, we started finding things that we could substitute for our current expenses or negotiated for a price reduction. You would be shocked at how much your bill will be reduced when you threaten to leave certain services!  There was:

  • Netflix or Hulu in place of cable
  • Using the library instead of buying books
  • Calling our internet company saying we were thinking about switching providers
  • Switching cell phone providers
  • Talking to an insurance broker and finding a cheaper auto and homeowners’ insurance rate (this was HUGE for us)

Think about what you have that you could substitute or negotiate on and commit to making the necessary changes over the course of a few weeks.  It’s not a fun task, because you’re usually on the phone for a while (gotta love being on hold).  I promise you it’s worth it and can have a huge impact on your monthly budget!

Create Funds

One of the things we had the hardest time budgeting around were the infrequent but predictable expenses.  Things like Christmas gifts, vacations, needing a new car, HOA fees, etc. can all be a monthly budget killer if you don’t properly prepare. The best way to handle these expenses is to create sinking funds that you allocate money towards on a monthly basis is preparation.  List them out and set a monthly savings goals.  Here are some examples of things you would allocate for:

  • Amazon prime membership
  • Costco membership
  • Credit card annual fees
  • Oil changes
  • Vehicle registration
  • HOA fees
  • Birthday/Holiday gifts
  • Vacation
  • Replacement vehicle (especially as your current vehicle gets older)

Related: 10 Simple Ways to Start an Emergency Fund Fast

The easiest way to manage your savings within these funds is to open as many bank accounts as you need.  We have 3 bank accounts that are for various things, but you can have several more if that’s what is easiest for you. I just prefer to have less and note in the ‘memo’ section what certain amounts are allocated towards.

Add In Daily Essentials for Personal and Home

One common question is how to deal with home goods and personal care items that you purchase with your groceries.  Maybe you go to Costco or Target and purchase a mixture of groceries, paper towels, shampoo, toilet paper, dish soap, etc.

Related: 10 Tips for Saving Money on Household Products

I recommend including these in your grocery budget, which is what I do.  You can look back through previous months to get a good idea of what you’re spending on these items to predict how much of your grocery budget will go towards these items.

You can also allocate a certain dollar number towards this each month and buy what you can within this budget.  This gives you the chance to stock up and create an inventory of products and capitalize on sales when you see them.  What items to think about:

  • Toothpaste
  • Shampoo/Conditioner
  • Moisturizers
  • Soaps
  • Dishwasher detergent
  • Dish soap
  • Garbage bags
  • Toilet paper
  • Paper towels
  • Over the counter medicines
  • Deodorant
  • …and so much more!  Look around your house at all of the things that keep your life running.

Note: One way that I’ve been able to cut back on personal care and home products is by DIY-ing many of the things we use on a daily basis.  I’m typically more of a DI-Buyer than DIYer, but there are so many simple DIYs you can do to save you a TON of money.  Here’s how I build my DIY toolkit:

And a few simple DIYs you’ll love:

What if You Don’t Have Enough or Any Leftover

If you get to the end of your budget and you just don’t have enough money for your expenses or any leftover for things you want to do (ie. babysitters for date nights, eyebrow waxing…you know, the important stuff!), my biggest suggestion is to cut what you can.  Go back to the items you tried to find a substitute for and just cut them.  Cutting cable is probably the easiest thing to do.

The other option is to find ways to MAKE more money to cover your expenses and then some. Are there things you can sell that you don’t use anymore?  We have sold SO many things over the years in local Facebook groups, on eBay or on Craigslist.  That could be a whole other post!

Fill in the gaps with cash back from apps.  I love using ebates on a variety of purchases from groceries to clothing, to Amazon purchases.  My absolute favorite app is Ibotta for refunds back on groceries.

If you’ve ever considered blogging or making money online, you can see:

I have an entire page on this blog devoted to earning extra income! I’ve interviewed other moms who have been able to earn either a part-time or full-time income from their own businesses. Go check out that page HERE for some inspiration.

Small Business Launch Plan Optin

Track Your Progress Regularly

Building new habits is hard, so you’re going to have to track your progress and check in on yourself regularly as you get started.  Maybe you or your husband forgets that lunch out with coworkers or that you had pants dry cleaned.  You want your budget to accurately reflect EVERY expense.

Once a week you can review your account information for anything you missed.  Do it daily if you have to in order to track accurately.

You may not believe me now, but budgeting doesn’t have to be this tedious thing that kills all joy in your life!  It actually opens you up to a lot more freedom and empowers you to make decisions that will benefit you long-term.

What are the biggest challenges that you face in creating your family budget? Let me know how I can best help you!

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The ultimate guide to creating a budget for beginners and people who hate budgeting. This is my step-by-step process with all of the best tips to take control of your personal finances. #budgetingforbeginners #budgettips #budgetingtools
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Sarah Nichols

Sarah Nichols, founder and content creator for Let's Talk Mom Business, has a background in business, marketing, research, and advocacy. combines her Masters in Business Administration (MBA) and experience as a Marketing Expert for B2B tech companies to help moms start and scale an online business or shake up their career after a career gap.

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