What is budgeting 101? In this post, we look at how to make a budget so you can always afford your basic needs.

Budgeting 101: Complete Guide to Always Having Enough

  • Post author:Bob Haegele
  • Post last modified:June 4, 2023

Creating a budget can seem like a challenging task. You might have many different expenses that change often. Thus, budgeting 101 involves making sure you don’t forget the most important expenses.

The idea behind budgeting 101 is to be sure you always budget for your most basic needs. While these will vary slightly from person to person, the most crucial items are typically the same.

In this post, we will go through a list of the most important items you should always include kn your budget. Doing so will help you avoid financial hardship and being unable to afford something you can’t live without.

Determine Your Take-Home Pay

The start of any budget is figuring out how much money you “take home” every month. If you get paid bi-weekly, all you have to do is add your two paychecks together.

For others, the task will be slightly more complicated. For instance, you might work a part-time job, sell items on eBay, or drive for Uber. In this case, you will need to deduct your own taxes and then add that additional income.

In any event, your final after-tax income will be the figure on which you will base your budget.

Decide on a Type of Budgeting

If you haven’t done very much budgeting, you might think there is only one way to do so. However, there are actually many different types of budgeting.

Figuring out the budgeting method that works best for you might take some trial and error. However, this is one of the first types of budgeting 101.

Once you figure out the type of budgeting that works best for you, then you can proceed to breaking down your expenses.

Figure Out Your Expenses

Although your expenses may vary, you probably have a lot of recurring ones. You probably aren’t going to see Taylor Swift every week. Or maybe you are – who am I to judge?

In all seriousness, you likely won’t be able to budget for those one-off expenses. However, the bulk of your budget are most likely expenses that are roughly the same every month.

Chances are that some of those expenses are essential and some not so much. After putting together a budget, you might decide to cut out some unnecessary expenses.

However, there are many expenses that you probably won’t be able to cut from your budget. That’s what we will cover in the following section.

Budgeting 101: Rent/Mortgage

Perhaps the most obvious budgeting 101 item is rent or a mortgage. It should go without saying that you never want to be in a position where you can’t afford it.

There are ways to make your housing expenses much cheaper, so if you are struggling, that may be something to consider. Regardless, you never want to end up in a position where you are evicted. That rings especially true if you have a family living with you.

Related: 7 Reasons We Weren’t Prepared to Buy Our Home

Car Payment and Repairs

I heard a story on the radio of a man whose car broke down and he couldn’t afford repairs. He ended up having to walk a large portion of his commute – rain or shine. He lives outside Detroit and although the city has public transit, he works long hours and there is limited service when he leaves work.

The exact details escape me, but I remember that he had to walk about 20 miles total each day due to not having a car. The story had a happy ending because this was picked up by news sources and it turned out that Ford gave him a brand new car.

Certainly, though, Ford can’t give everyone a brand new car. For most of us, we’ll need to be sure we can afford both a car payment (if you have one) in addition to budgeting extra for repairs.

Repair costs can come out of an emergency fund, but if you don’t have one, that is something you should also address.

That is unless you want to walk 20 miles every day. I know I don’t.

Budgeting 101: Food

Including food in budgeting 101 may seem obvious; after all, everyone has to eat. However, there’s more to it than just that.

Budgeting for food costs can help you keep costs under control. By planning meals ahead of time, you can avoid going out for dinner and cook at home instead.

Depending on your schedule and preferences, you may decide to meal prep in bulk or simply make each meal as you go. It helps to have a game plan either way, though.

Plus, certain items such as chicken, rice, and beans are used in a variety of different recipes. It helps using versatile ingredients to give yourself a variety of options.


Maybe you can go without keeping the lights on, but in general, electricity is considered a necessary expense. And nowadays, that usually includes internet service as well.

Make sure you have enough room in your budget for these expenses. Note that you may be able to shop around if your utilities are too high, depending on your area.

I have even heard of people telling their internet provider they are thinking about leaving to get a lower rate. I can’t speak to whether that will work for you, but ultimately, you are likely going to keep your internet. So, make sure you budget for it.

Medical Bills

Medical bills are something every budget should include. Of course, medical expenses can vary quite a lot from one person to another. Younger people may not have much other than the occasional checkup and cleanings at the dentist.

On the other hand, some people have complex medical needs that require significant ongoing expenses. What’s more, certain expenses are increasing at unusual rates at the moment. You may have heard about the spike in insulin prices, for example.

Again, medical bills will vary widely for each person, but it’s important to know what your expenses are and then budget for them.

Credit Card Bills

Credit card bills are something you certainly shouldn’t ignore. I recommend paying off credit cards in full every month, in some cases that may not be possible.

The average household currently has several thousand dollars in credit card debt, so you may be unable to pay them off completely in one month.

But even if you can’t, it’s important to include credit cards in your budget if you use them. The higher your balances get, the more interest you will incur. That makes credit cards increasingly difficult to repay.

And if you simply stop making payments, that is certain to derail your credit history. If that happens, you will have serious difficult when applying for a loan for a home or a car.

You should always pay as much as you can on your credit card bills every month. If you already have a large balance, try to pay more than you spend on them. The ultimate goal should be to eventually pay them off completely.

Loans (Student Loans, Personal Loans)

Loans are another form of debt that you should always prioritize. Like any form of debt, student loans can wreck your credit if you don’t repay them.

Federal student loans can typically be discharged in the unfortunate event that you die. However, in some cases, private student loans won’t even be discharged in such an event.

The reason for mentioning this is that, basically, it’s quite hard to get rid of student loans. Generally, repaying them is the only way to do so. Luckily, I’ve put together a list of creative ways to pay off student loans. Sometimes, you just have to get creative.

Budgeting 101: Discretionary Spending

Finally, your discretionary spending are those expenses you could technically live without but would rather not do so. Netflix subscription? Amazon Prime? Sure, you could live without these things, but you’ve decided it’s worth footing the bill.

If you know you will have these expenses every month, it makes sense to include them in your budget.

Decide How Much You Want to Save

After you have worked your essential and discretionary expenses, hopefully you will have room left over. We’re not done here! Although you could simply spend the rest of your money, it’s important to save, too.

As mentioned earlier, if you don’t have an adequate emergency fund (6-8 months of expenses), that should be the first thing you work on save for.

Related: Prioritizing Savings and Debt: Which is More Important?

Beyond that, you can work on saving for retirement. Whether you want to retire early or retire at 67, it’s important to have enough money saved. Depending on how safe you want to be, you should generally have at least 25 times your annual expenses saved in a retirement fund.

And you can never save too much. Saving for retirement means making a sacrifice now to be better off later. In our consumerist culture, we are taught to live in the moment. But doing so can have the opportunity cost of not having enough saved.

Budgeting 101: Always Have Enough

The goal of budgeting 101 should be to ensure you always have enough. Remember that most of us can never buy everything under the sun, so this means having enough for your needs.

You may not be able to afford everything you could ever want, but that doesn’t mean you failed budgeting 101. Besides, trying to buy everything you want will hinder financial independence, retire early.

Although there is nothing wrong with buying things you want, it’s best to pick one or two things you like to splurge on. Don’t go overboard, though.

Because at the end of the day, it’s your needs that are really important.


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Hey there. My name is Bob Haegele and I'm a personal finance writer who has been freelancing since 2018. Since then, I've built a six-figure career as a freelance writer. My work has been featured in Business Insider, Forbes Advisor, TIME.com, USA Today, and many other outlets. Interested in starting a blog of your own? Check out my post on starting a blog.

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