How to Get Started with a Simple Money Plan in 2025
Gathering Your Financial Information: The First Step to Budgeting
Before creating a budget, you need to know where you currently stand financially. This information-gathering phase is crucial—it’s like taking inventory before planning a trip.
Start by calculating your total monthly income. Include your primary job, side hustles, child support, investment income, or any other money coming in each month. For irregular income, calculate the average monthly amount based on the past six months. Make sure to use your net income (take-home pay after taxes and deductions) rather than gross income, as this represents the actual money you have available to budget.
Next, track your spending for at least 30 days. This step reveals your actual spending patterns, not what you think they are. You can use bank and credit card statements from the previous month, but going forward, consider using a budgeting app like Mint, YNAB, or Personal Capital to automatically categorize your transactions. Alternatively, a simple spreadsheet works well if you prefer manual tracking.
Categorize your expenses into fixed (rent/mortgage, car payment, insurance) and variable (groceries, dining out, entertainment) categories. Don’t forget to include irregular expenses like annual subscriptions, car maintenance, or holiday shopping by dividing the annual amount by 12 to get a monthly figure.
This information-gathering stage often reveals surprising patterns. Many of my clients discover they’re spending substantially more on eating out or subscription services than they realized. One women I know found she was spending $340 monthly on coffee shop visits—knowledge that motivated her to make changes that aligned better with her financial goals.
Setting Up Your First Budget: A Step-by-Step Approach
Creating your first budget doesn’t need to be complicated. Follow these straightforward steps to develop a workable plan.
Start by listing your financial goals. Why are you budgeting? Whether it’s building an emergency fund, paying off credit card debt, or saving for a down payment, clearly defined goals provide motivation when budgeting gets challenging. Make these goals SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. Instead of “save more money,” try “save $3,000 for an emergency fund by December 2025.”
Next, create your budget categories. Begin with essential expenses: housing, utilities, groceries, transportation, insurance, and minimum debt payments. Then add discretionary categories like dining out, entertainment, shopping, and personal care. Don’t forget savings categories aligned with your goals and sinking funds for irregular expenses like car repairs or holiday gifts.
Allocate your income across these categories based on your chosen budgeting method. If using zero-based budgeting, assign every dollar until you reach zero. With the 50/30/20 method, ensure your categories fit within the appropriate percentages. Be realistic—a budget that looks perfect on paper but doesn’t reflect your actual life will quickly fail.
For many people, the first budget reveals a gap—expenses exceeding income. This isn’t failure; it’s valuable information. You have three options: increase income (side hustle, overtime, asking for a raise), reduce expenses (cutting subscriptions, negotiating bills, reducing dining out), or some combination of the two. Making these adjustments before they become financial emergencies is precisely why budgeting is so powerful.
Remember that your first budget is a starting point. Plan to review and adjust it regularly as you learn what works for your lifestyle and as your financial situation changes.
Common Budgeting Pitfalls and How to Avoid Them
Even with the best intentions, new budgeters often encounter roadblocks. Awareness of these common challenges can help you navigate around them.
Underestimating expenses is perhaps the most common mistake. Many people forget about irregular expenses like car registration, annual insurance premiums, or holiday spending. The solution is creating sinking funds—small amounts set aside monthly for these predictable but infrequent costs. For example, if you spend $600 on holiday gifts each year, setting aside $50 monthly prevents December credit card debt.
Creating an overly restrictive budget is another frequent pitfall. Eliminating all discretionary spending might look good on paper, but it’s rarely sustainable. Instead, build in reasonable allowances for enjoyment—what financial experts call “planned spending.” This approach acknowledges that life should include joy and prevents the budgeting equivalent of crash dieting.
Failing to adjust for life changes can derail even well-established budgets. Income fluctuations, moving to a new city, relationship changes, or having a child all necessitate budget revisions. Schedule quarterly budget reviews to ensure your plan still aligns with your current reality.
The “budget is set in stone” mindset causes unnecessary stress. Your budget is a living document that should evolve as you learn and as circumstances change. Expect to make adjustments, especially in the first few months. What matters is the process of planning and tracking, not perfect adherence to initial projections.
Finally, budgeting in isolation often leads to failure, especially in relationships. If you share finances with a partner, budgeting should be a collaborative process that reflects both people’s priorities. Regular money discussions and shared decision-making create financial alignment and prevent conflict.
Making Your Budget Stick: Habits That Support Financial Success
Creating a budget is just the beginning—maintaining it is where many people struggle. Developing supportive habits turns budgeting from a one-time exercise into a lifestyle.
Regular budget review sessions are essential. Schedule weekly 15-minute check-ins to track spending and make adjustments. Monthly, conduct a more comprehensive review to evaluate your progress toward goals and plan for upcoming expenses. These sessions convert budgeting from a reactive to a proactive process.
Automating key financial activities reduces friction and the potential for missed targets. Set up automatic transfers to savings accounts on payday, automatic bill payments to prevent late fees, and automatic investments to build wealth consistently. What happens automatically doesn’t require willpower or remembering.
Creating visual reminders of your financial goals can provide motivation when discipline wavers. Whether it’s a savings thermometer on your refrigerator, a vision board of your dream home, or a debt paydown chart, these visual cues connect your daily financial choices to your bigger objectives.
Celebrating milestones reinforces positive financial behaviors. When you reach a savings goal, pay off a debt, or successfully maintain your budget for three consecutive months, acknowledge that achievement. The celebration doesn’t need to be expensive—a special home-cooked meal or an afternoon at the park can mark the occasion without derailing your progress.
Finding an accountability partner or community transforms budgeting from a solitary chore into a shared journey. Whether it’s your partner, a financially-minded friend, or an online community. Discussing challenges and wins with others provides both support and perspective.
Remember that budgeting is a skill that improves with practice. Your first budget won’t be perfect, and that’s completely normal. What matters is beginning the process and committing to regular refinement as you learn. Each month gets easier as you build the habit and gain insights into your financial patterns.
I encourage you to take action today—not next month or when you feel “ready.” Choose one step from this guide and implement it within the next 24 hours, whether that’s tracking your spending, calculating your income, or downloading a budgeting app. Financial control begins with a single step, and the sooner you start, the sooner you’ll experience the peace of mind that comes from knowing exactly where your money is going.
What’s your biggest challenge with budgeting, and which approach from this guide do you think might help? Share in the comments—I’d love to hear about your budgeting journey!
