Budgeting For Dummies Cheat Sheet

May 05, 2024

Before you begin to explore any budgeting method, you should know your monthly income (after taxes). Then make a list of all your fixed and variable expenses. Fixed expenses are expenses that don’t fluctuate, such as rent or car insurance. Variable expenses, like groceries, can fluctuate or change monthly.

Next, subtract your monthly expenses from your income to ensure you have enough money to cover your expenses. The following figure identifies the three budgeting methods discussed in Budgeting For Dummies.

Zero-based budgeting is when you assign your income to predetermined budget categories to give every single dollar a job. The overall goal is to have a zero balance by the end of the month and account for all your spending.

You can create your own zero-based budget with the following steps:

See what expenses you can cut to lower the amount of money you need and then use that savings toward any financial goals or outstanding debt.

Here’s an easy example of zero-based budgeting for a monthly income of $3,000:

With this budget, you’ve accounted for every dollar you bring home.

The envelope budget method helps you track your spending by using cold hard cash for all purchases. Cash envelopes can also help you become more disciplined by making you more physically aware of the funds you have going out.

Here’s how to make your spending tangible with an envelope budget:

The pay-yourself-first method allows you to take care of your financial priorities without micromanaging your spending. If you often struggle to complete your goals or make progress, this budgeting method may be the right one for you.

However, if you need structure, this approach isn’t your best option. It has too much gray area that makes overspending easy.

Here are some tips for using the pay-yourself-first budget:

If you’re interested in keeping your spending in check but still want freedom to spend as you want, consider the 50/30/20 budget. It’s a simple way to cover your expenses while meeting your financial goals.

For your budget to work, you must be consistent. Most people struggle to budget because the learning curve that typically comes with budgeting makes that initial consistency difficult. These tips can help you stay the course without throwing in the towel:

Athena Valentine Lent is the founder of Money Smart Latina, a blog and financial education resource center. She leads workshops and classes on money management, financial resiliency, and navigating finances. She publishes a personal finance column at Slate.com.