Budgeting Tips: What Should You Do First?

If you’ve ever sat down, cringed at your bank balance, and thought, “Okay, time to make a budget,” you might feel completely stuck about what comes first. Here’s the truth: you’ve got to figure out your net income before anything else. Not just what your job pays on paper—but how much actually lands in your account after taxes and deductions.

A surprising number of people guess their income or go by gross pay, and that just sets you up for headaches. If you work hourly, have a side gig, or your income changes month-to-month, add it all up and look at the money that actually ‘shows up.’ Grab your last couple of pay stubs, check your bank history, or even use your banking app to pull up the monthly average. Don’t forget alimony, support, or freelance cash if that’s part of your world.

Why start here? You can’t cut spending or plan savings unless you know the real number you’re working with. Sketchy guesses mess up even the best intentions. Once your net income is clear, you have a solid target—now you can start getting smart about where your money is actually going.

• Figure Out Your Net Income
• Track Every Expense—The Good, Bad, and Ugly
• Spot the Patterns That Drain Your Wallet
• Plan for What Matters (Not Just What’s Left Over)

Figure Out Your Net Income

If you skip this step, your whole budget could go sideways. Net income is simply the cash you actually get to keep after taxes, Social Security, healthcare, and anything else your job pulls out. That’s the number you can spend—nothing else matters for a real budget.

This is where lots of people mess up. They work with their gross (pre-tax) pay and wonder why bills seem to eat up more than expected. For example, if your paycheck says $4,000 a month but what hits your checking account is just $3,200, your budget should use $3,200.

Not sure where to look? Find your net income by:

• Checking the take-home pay on your latest pay stub
• Adding up what actually deposits into your account each pay period
• Including all sources: if you make side gig money, count that too, but only what you actually receive after fees and taxes

If you have an irregular income—maybe you freelance or deliver food—it helps to average a few months for a more realistic number. Pull out your bank statements for the past three to six months and do a quick average. Here’s how you might break it down in simple numbers:

This $3,730? That’s your real, spendable money—the budgeting number you want.

If you’re paid weekly, multiply your actual weekly payout by 52, then divide by 12 to get your average monthly net income. Do this math up front and everything becomes way simpler. My own budget went from a mess to manageable once I stopped kidding myself about my “real” income.

Track Every Expense—The Good, Bad, and Ugly

If you skip tracking your spending, your budget is basically a shot in the dark. Every financial expert says the same thing: before you try to cut costs, you need to know exactly where your money is already going. Even small purchases—like that coffee you grab on the way to work, or the dog treats for Luna—really add up over the month.

Start by grabbing all your bank and credit card statements from the last month. Don’t just write down the big stuff like rent or groceries. Include absolutely everything, even the "oops" buys and the stuff you regret at 2 a.m. when online shopping hits. It’s not just about bad habits, though; sometimes you find good surprises—like discovering you’re actually spending less on takeout than you thought.

Here’s one way to break it down:

• Write down (or use an app to log) every single purchase for at least 30 days.
• Be honest—don’t leave out things just because you’re embarrassed. This isn’t a test, and no one’s grading you.
• Tag each expense by category: essentials (rent, utilities, groceries), non-essentials (eating out, Netflix, shopping), and random one-offs (unexpected vet trips—I get those a lot with Luna).

What’s the biggest shock for most people? According to a 2024 U.S. Bank consumer study, the average person forgets to count over 20% of their monthly spending. Apps like Mint, YNAB, or even your basic banking app can help automate this, but even tracking with pencil and paper works if you stay consistent.

Don’t freak out over those ugly parts of your spending. The point isn’t to beat yourself up—it’s to get a crystal-clear picture so your budgeting actually reflects your real life, not just what you wish your habits looked like.

Spot the Patterns That Drain Your Wallet

Once you know what comes in, it’s time to see what’s leaking out—and trust me, this is where most budgets break down. You’re probably not blowing all your cash on one thing. It’s usually a bunch of small habits and unconscious spending that pile up fast. That’s why you need to spot the patterns that are quietly killing your budget.

The average American spends over $3,500 a year on eating out—yep, that’s almost $300 a month just for takeout, snacks, and restaurants. Even so-called little treats, like daily coffees or random online buys, can sneak up and wreck your plans. Streaming services, gym memberships, and subscriptions you barely use also love to stay hidden in your statements.

Here’s how you can make these money-wasting habits jump right out at you:

• Print out or review your last 1-2 months of bank statements and credit card bills.
• Highlight every purchase that’s not a real need (think: anything you could truly live without—hello, late-night sushi delivery).
• Sort each one by type: food out, entertainment, shopping, subscriptions, etc.
• Add up each group to see what you really spend in a normal month.

Check out the kind of breakdown people commonly see month-to-month:

Looks harmless until you add it up, right? You might not need to cut everything, but being real about what drains your wallet is the only way to change things. Patterns like these are the reason folks with good incomes still feel broke. Spotting the leaks means you can patch them, or at least keep them under control.

Plan for What Matters (Not Just What’s Left Over)

This is the point where most people mess up their budget—they look at what’s left after paying the bills and think, “Well, I guess I’ll save or spend whatever’s left.” But if you really want your money to work for you, you’ve got to flip that idea. Purposefully plan where your money will go, especially for things that actually matter to you.

First, get real about your priorities. Want to build an emergency fund, take a summer trip, or save for a pet’s vet bills (like all my extra cash for Luna’s mishaps)? You can’t just hope they’ll happen. Put them at the top, not the bottom, of your budget.

• Budgeting isn’t just about cutting back—it's about directing money toward what makes the biggest difference in your life.
• Try the “pay yourself first” method: right after payday, move a set amount into savings for your main goal—don’t wait until month’s end.
• Set up automatic transfers to savings so you don’t have to rely on memory or motivation. You’re way less likely to miss money you never see.
• Small goals work too. If retirement feels too far away, focus on building $500 in savings or paying off a credit card.

Priority-based budgeting isn’t just a fad. According to a 2024 NerdWallet survey, people who set specific savings goals are 44% more likely to stick to their budgets than those who just track expenses.

It helps to see how your priorities stack up in real numbers. Check out this simple example:

The point? You don’t just budget “what’s left.” You plan for what matters first. That way, when surprise fun stuff or emergencies happen, you’re ready—and the whole process feels a bit less stressful.