As 2025 comes to a close, many of us are looking forward to the year ahead. This inspires some to set goals – things to achieve, improve, or even let go of. If one of your goals is to improve your financial health, you’re not alone. In fact, 74% of Americans surveyed admitted to having a problem with overspending, a key part of money management.

Starting and sticking to a budget is a practical way to keep your spending in check. While this may sound like an overwhelming task, you can actually start a simple budget in just a few steps.

1) Build a Positive Mindset Around Having a Simple Budget

Before diving into numbers, what do you think about sticking to a budget? Don’t worry if your first thought is that it sounds like a punishment or restriction. However, a simple budget isn’t just for those struggling financially. The truth is it can empower anyone, no matter their financial situation.

Budgeting can help you feel more in control of your life in many ways. Some benefits of following a simple budget include: 

• A better look at your financial health: You’ll know how much money you have coming in and going out each month.
• A way to track your financial goals: You’ll easily be able to see what you need to achieve goals like paying off a debt or going on a well-deserved vacation. 
• The ability to enjoy life without financial regret: Shop, eat out, or enjoy other activities with a plan that keeps you from splurging.

 2) Get a Clear Picture of Your Financial Health

Once you understand the upsides of budgeting, it’s time to take a close look at your income and spending. You can get started by reviewing how much money you make each month. This will help you understand what’s coming in and make it easier to decide where it should go, improving your financial health.

If your earnings change monthly, you can use your lowest recent month or an average. Either approach can help you create a simple budget. Using your lowest recent month can help you avoid overspending, while going with an average will give you a balanced estimate.

After you determine how much you bring in, think about what you spend each month. One way to approach this is in categories. Common spending categories include rent/mortgage, groceries, bills, and fun. You’ll likely have expenses that stay the same (like rent) and ones that change (like groceries or fun money). 

A glance back at previous months can help you know how much you spend on recurring expenses. For those that change, try to estimate how much you spend on average. Your guess doesn’t have to be perfect – you just want to get the best picture you can.

3) Incorporate Essentials, Savings, and Fun into Your Simple Budget

With an idea of what you make and spend, you can now split your income among categories. Three common budget categories are essentials, savings, and fun money. 

As your essentials are non-negotiable, it’s best to begin with them first. Essentials is usually the easiest category to start with when creating a budget. This is because their cost typically remains the same.

Next, think about how much you want to save. Saving isn’t just about putting money away, it also involves planning for the future. One way to plan for the future is to set aside a portion of your income for the unexpected. An emergency fund is for covering costs you didn’t plan for, like car repairs or medical bills. It can help you stick to other parts of your budget, support your financial health, and provide you with peace of mind.

You can also set yourself up for a bright future by budgeting for bigger goals. You might decide to save up for a new home or car, or even a comfortable retirement.

After you figure out how much to save, reward yourself some fun money. This is your monthly allowance for what brings you joy. Think coffee runs, night out with friends, or even money for hobbies.

Luckily, choosing how to divide your income can be easier than it sounds. The 50/30/20 rule might sound technical – but it’s actually a simple budgeting guideline for beginners. You can follow this guideline as is, or adjust it to fit your needs and goals. It breaks spending into three categories: 

• 50% for needs
• 30% for wants
• 20% for savings and debt pay-off

Tips for Sticking to a Budget 

 After drafting a budget, it’s time to set yourself up for success. Sticking to any plan takes effort, but being intentional makes it doable. Some  practical tips for sticking to a simple budget include:  

• Review your spending regularly – Without keeping a close eye on your habits, it is easy to overspend. One way to stay on track is to make a simple log that has your limit per spending category. At the end of each week, add up your spending per category then subtract it from each category’s spending limit.
• Keep your goals visible – Sticking to a budget isn’t always easy. It can involve taking extra time to find the best deals or postponing buying what you want. Having reminders of what you’re working toward can keep you focused. You can write your goals on sticky notes, keep a note on your phone and update it as you go, or use a savings tracker.
• Automate when possible – Automating payments and transfers is a great way to stay disciplined. Automation saves time, keeps your bills paid, and makes it easy to build your savings. It also helps you avoid spending on things you didn’t plan for. 
• Treat yourself – The benefits of sticking to a budget are often most visible over time. Encourage yourself to stick with it by recognizing your efforts as you go. When you keep to your budget, congratulate yourself for a job well done. This can look like using a bit of your fun money on a coffee, dessert, or a hobby. 
• Revise your simple budget as needed – Choose a time in advance, such as once a month, to look over your budget. Regular check-ins aren’t just for updating numbers –  they’re a chance to see how well you’re sticking to your plan. 

Let’s keep the conversation going – What are your financial goals? What would help you overcome your biggest budgeting challenge and improve your financial health?