Budgeting 101: Where to Start
I get this question often from family and friends:
“Casey, I see what you guys have been doing financially… where do I even start?”
Before we get into the mechanics of budgeting, I want to kindly remind you of something important — no two financial situations are the same.
My husband and I started a rough budget in 2015 when we were in our 20s and had no kids. We built our lifestyle intentionally around our budget and our goals. That meant things like buying used cars to take advantage of depreciation and choosing a house where the mortgage stayed under 20% of one income.
Most people build their lifestyle first and only later decide they want to start budgeting. When that happens, it can feel much harder because the big expenses are already locked in.
A friend once told me:
“A luxury once tasted becomes a necessity.”
I’ve taken that saying to heart. I try to keep my luxuries minimal — but I’ll be honest, if I had to give up the heated seats in my car now that I’ve had them since 2024, that would be pretty hard.
With that perspective in mind, let’s get started.
Step 1: Set Aside a Day to Understand Your Spending
Budgeting starts with understanding where your money is already going.
Set aside a day and print the last 12 months of bank and credit card statements.
Yes — all of them.
Multiple credit cards? Tough luck. Print them all.
This step is tedious, but it’s also the most eye-opening part of the entire process.
Step 2: Categorize Everything
Next, open an Excel spreadsheet (my personal favorite) or write everything down by hand.
Go through your statements and organize every purchase into categories.
Below are the exact categories we use in our family budget to help get you started.
Mortgage 🏚
Daycare 👶🏼
Groceries 🛒
Car Gas 🚙
House Gas 🏠
Electric 💡
Internet 💻
Subscriptions 🎥
Dining Out 🥂
Fun Money 🍱
Gifts 🎁
Christmas 🎄
Home Maintenance 🛠
Water 💦
Escrow 💸
Auto Maintenance 🚗
Car Insurance 🚘
Vacation 🏝
Life Insurance 🏥
Pets 🐈
Clothing 🕶
Kid Sports or Activities ⚽️
Phone 📱
Step 3: Accept That It Won’t Be Perfect
As you go through statements, you’ll quickly realize that not every purchase fits neatly into a category.
A Walmart or Target run might include groceries, clothing, and pet supplies all in one transaction.
Clothing purchases might be buried in dozens of online orders.
Just do your best to estimate. The goal here isn’t perfection — it’s awareness.
Step 4: Why You Need 12 Months of Data
I recommend using a full year of statements because of irregular expenses that are easy to forget.
For example:
- Annual insurance bills
- Subscription renewals
- Christmas spending
- Summer vacations
- Unexpected home repairs
Christmas alone can easily run into the thousands if you don’t account for November and December spending.
Looking at a full year helps prevent those surprises.
Step 5: See Where You Stand
Once you total everything, calculate your monthly averages.
Ideally, each month ends with money left over.
But if you’re like most Americans, you may find that you’re breaking even — or even running negative some months.
Don’t panic. This is where the work begins.
Step 6: Identify What Can (and Can’t) Change
Some categories are difficult to change quickly:
- Mortgages
- Auto loans
- Daycare
You could refinance loans if interest rates drop, but extending payments just to lower the monthly amount usually isn’t the right move.
Other categories are much easier to adjust.
Step 7: Find the Easy Wins
Subscriptions are often the easiest place to start.
Look for cheaper internet plans and call your provider. I threatened to cancel my internet this year and my $85.99 monthly bill magically dropped to $30 after a 45-minute phone call.
Streaming services are another opportunity.
Try dropping down to one service for a month and see how much you actually miss the others.
Also remember that your local library often offers free audiobooks, movies, and digital services.
Step 8: The “Fat Cow” Categories
Dining out, groceries, and fun money are usually where the biggest spending leaks happen.
I personally know these are my own “fat cow” categories — the places where cutting back can make the biggest difference.
I’ll go deeper into this in a future post because food spending deserves its own discussion.
Step 9: Build a Budget That Works for You
Once you know your monthly averages, start setting limits for each category.
For fixed expenses like your mortgage or car payment, your number will stay the same.
For flexible categories, try trimming them slightly to start.
You could cut them aggressively if you want to move faster financially, but small sustainable changes tend to last longer.
Step 10: Choose Your Budget Tool
There are many tools you can use to track your budget.
Some people love budgeting apps.
I personally liked YNAB (You Need A Budget), and there are often free trial codes floating around Reddit.
Some of my friends use EveryDollar.
Personally, I track everything in a Google spreadsheet.
I wanted to be a pencil-and-paper person, but I’ve learned that anything physical I write on gets lost or stained within about three minutes.
Use whatever system you will actually stick with.
Step 11: Avoid the “Budget Burnout” Trap
Budgeting can feel exciting the first month.
You’re motivated and everything is fresh.
By the second month, the budget can start to feel restrictive.
By the third month, you may find yourself buying random things just to escape the feeling of being boxed in.
Be honest with yourself.
A good budget isn’t meant to be a cage — it’s meant to be guide rails that keep you from going off track.
If your morning coffee brings you genuine happiness, keep it. Maybe cancel the streaming subscription you only used once for a show that already ended.
Final Thoughts
At the end of the day, a budget should help you optimize both your money and your happiness.
It should show you where your real priorities are.
Looking at my own March 2026 budget right now, I can see that two categories are negative:
- Fun Money: -$20.11
- Home Maintenance: -$210.61
I don’t feel guilt or shame about that.
I’ll simply move money from categories that matter less to cover those expenses.
Because money is a tool — not a ball and chain.