In the state of Ohio, Financial Education has been added as a required course for graduation. My oldest was working on an assignment related to budgeting, and I sent her to this site as I’ve discussed the topic many times. It was then that I realized I never actually wrote a basic introduction to budgeting. While my detailed breakdowns and real-world examples in other articles are useful, they do not cover the fundamentals.

Definition C is going to be the most relevant for the purposes of this article. Making a budget is about giving a plan to your money. Many highly successful people stick to ironclad budgets that are set in stone, but for most people, that requires an extreme amount of discipline.

The goals of every budget should be simple:
1) To stay below the budget number.
2) To cover planned anomalies.

I’ll give an example: I have a budget spreadsheet that tracks every utility bill I’ve paid across four different states over 15 years. Over that time, my average electric bill has been $206.49 and my average natural gas bill has been $41.78. This would imply a standard combined budget of $250 per month between the two — since in the winter the furnace uses more gas and less electricity, and in the summer the AC uses more electricity and less gas.

However, if I look at just my 2025 and 2026 averages, electric comes in at $297 and $305, and gas sits at $68 and then $96. That means my budget needs to account for roughly $400 per month in just the two major utilities. Utility costs are somewhat controllable — shorter showers use less gas on the water heater, lower thermostats in winter save money, higher thermostats in summer save money — but a good budget plans for the highest expected cost, ideally rolling leftovers into itself to cover unexpected spikes.

There are many methods of budgeting in the digital age — dozens of apps and thousands of spreadsheets you can buy — but the most basic and successful is the envelope budget. The idea is simple: you take your paycheck out as cash and put set amounts of money into marked envelopes. My family does this for groceries and miscellaneous spending. It works for most things, though utilities and mortgages really want digital payments these days.

While I like to break my budget into as many trackable categories as possible, a good budget can remain simple:

• Household: Mortgage/Rent, Utility Bills, Internet
• Future Self: Retirement, Investments, Emergency Fund
• Food: Groceries, Eating Out
• Transportation: Bus/Train Passes, Gasoline, Car Payment, Repairs, Registration, Insurance
• Entertainment: Subscriptions, Concerts, Wants (Not Needs)

You could divide those five categories into sub-categories, but sometimes its easiest to start small. Several items there are non-negotiable: House, Water, Heating, Food, but I think that people also need to put the Future Self category as a priority that is not negotiable. A very famous book, The Richest Man in Babylon, says to set aside 10%, but the FIRE movement says 50%. Other parts of this series cover why 50% should be a priority number one goal for young adults, but if you’re just starting out, bake 10% into your budget from the start.

If you start to figure out your budget and you get very close to $0 or end up in the negatives, it’s time to figure out two things. The first is what can you reduce or cut down, and the second is how do you make more money? If you’re monthly budget leaves you with $5 left over for the whole month, but you pay for Neftlix, Spotify, Hulu, and World of Warcraft…cancelling all of those will free up almost $100 per month. Use the library for entertainment, buy a $30 Roku Stick at Walmart and watch free TV on Pluto (it even has several on demand options).

Let’s work through a basic budget and remember that an employer 401k Match is FREE money you are leaving in the trash can if you don’t take it, even at minimum wage. Ohio minimum wage is $11/hr, we will use that at full time hours to make our budget. 11 times 40 times 52 or $22,880.

Category	Budget Amount Per Month	Total	Notes
Gross Annual Income	$1,906.66	$22,880	40 hrs/wk × 52 wks
FICA Taxes (7.65%)	$145.83	-$1,750	Employee portion only
Federal Income Tax	$56.50	~-$678 (before credits)	Standard deduction $16,100
State Income Tax	$0	$0
Total Taxes	$202.33	-$2,428.00
Rent + Utilities (Many apartments include them)	$900.00	-$10,800.00	High-end estimate
Phone/Internet	$50.00	-$600.00	Hotspot combo
Food	$300.00	-$3,600.00	Our family of 5 uses $350/month
Total Basic Expenses	$1,250.00	-$15,000.00
10% to retirement/investing.	$190.66	$2,288.00	Bare Minimum
Leftover	$354.67	$4,256.04

This isn’t a perfect breakdown, as covering subscriptions, emergency fund savings, car insurance, planning for future repairs or necessities are all reasonable things to put into your budget, but would be tedious to cover here. What I want to highlight with the above breakdown is that all the basics are being covered, on minimum wage with still having some money left over. Also if only $1000 of that $1,250 goes into a retirement account you would qualify for the saver’s credit which can zero out that federal income tax bill, putting almost $700 more dollars into your pocket. If your employer gives a 5% match that adds another $1,144 to your annual income totaling $1,844, or an 8% boost to your take home pay.

Basic, or complex is up to each individual, but a budget is a vital part of a healthy financial life. If you can’t plan where your money goes, you can’t put it to work making more money for you.

~~Miniwing~~
Investor, Stoic, Parent