The Comprehensive Guide to Budgeting

An introduction to budgeting.

You made it! After years of exams, group projects, and college jobs, you got your degree. Since then you have been adjusting to your new role in the professional world, along with the early financial benefits of your hard work. Let’s face it, you have never been making this much money before. And yet, with this new sense of financial freedom comes financial burdens. Student loan payments begin to become due, rent isn’t getting any cheaper, and grocery bills add up quickly. Whenever you check your bank account, you are a bit surprised and concerned that your money is not adding up as quickly as you’d have thought. You realize you need to start budgeting!

In this article, we will explore what a budget is, why it is so important for young professionals, and how you can take control of your personal finance today with an in-depth breakdown of the essential elements of your budgets. You will even find a free template to use. Let’s get started.

What is a Budget?

What is a budget? Let's explore!

Okay, I’m not going to patronize you. At this point in our lives, any young professional is going to know what a budget is, at least at a high level. However, it does not hurt to define it once more for the sake of our article.

A budget is a tool allowing you to forecast your expected income and expenses and record their actual values.

Budgets can be scaled to meet your needs, whether you would like to view your personal finances on a weekly or monthly basis. Moreover, you can (and should) add as much detail as you would like to each section in order to make your forecast as accurate as possible. Below, we will review why budgeting is important.

Why is Budgeting Important?

Budgeting is an important part of your personal finance!

When I started my first role after graduation, the paychecks absolutely dwarfed any job I had worked at during university or high school. It was a sudden and dramatic shift in my income, and I found myself living comfortably despite my usual bills and new student loan payments. However, as the months went on I noticed that my spending was higher than I realized. I had fallen victim to the rude awakening that many young professionals experience in their early careers: Lifestyle creep.

Lifestyle creep is the result of using your increased income for additional or nonessential expenses. Eating out more often, taking expensive vacations, and upgrading your wardrobe are not bad things on an objective level, but it can become very easy to let these actions continue to impact your income if left unchecked.

Budgets allow you to first recognize your income and your essential expenses. From there, you can set your own targets or limits for nonessential expenses and savings. Now that we have discovered why budgeting is so important to maintaining control of your finances, we are ready to explore the key line items you will want to include in your own!

Essential Budgeting Elements

The essential elements of budgeting are explored below.

In our next lengthy section, we will review the primary elements of budgeting, as well as what specific items should be found under each element to ensure a complete picture of your finances. For the sake of this guide and our attached template, we will be reviewing a monthly budget. You can easily scale this to a weekly budget with some simple division if you desire. Here we go!


Income is comprised of two sub-categories that you will find below:

  • Primary Income – Your total monthly income received from your primary job after taxes, insurance, and retirement contributions are deducted
  • Secondary Income –Your total monthly income received from any secondary jobs after taxes (you can include a separate line item for each additional source of income, and in the future we will feature an article exploring side-hustle opportunities for young professionals)

Essential Expenses

Essential expenses consist of the payments you make for important utilities/assets or outstanding debt:

  • Rent – Your monthly rent payment
  • Utilities – Your monthly utility payments (if not included in rent)
  • Phone – Your monthly phone bill
  • Student Loans – Your monthly student loan payments
  • Car Loan – Your monthly car payment
  • Car Insurance – Your monthly car insurance payment
  • Groceries – Your monthly grocery spending target

Nonessential Expenses

Nonessential expenses include any expense that you incur on a monthly basis that does not include utilities, loans, or debt:

  • Cable/Streaming – Your monthly bill for cable or streaming subscriptions
  • Gym Membership – Your monthly payment for gym membership (if applicable)
  • Fast Food/Take Out – Your monthly allowance for purchases outside of your grocery expenses
  • Recreation – Your monthly allowance for purchases related to leisure/recreation activities
  • Miscellaneous – Your monthly allowance for any unanticipated and uncategorized expense (i.e. car repairs, clothes, home improvement items, etc)


Savings represent money that you put aside each month (either on-paper or in a separate account) to meet certain savings targets:

  • Emergency Savings – Your monthly contribution to emergency savings fund (most recommend emergency savings targets should reflect 1-3 months of essential expenses)
  • Life Event Savings – Your monthly contribution to savings you are allocating for major life events (wedding, house down-payment, etc)
  • Miscellaneous – Your monthly contribution to any miscellaneous asset or event (new car, expensive vacation, etc)

Net Income

As you can probably guess, your net income is the value of your monthly income remaining after deducting all essential expenses, nonessential expenses, and savings contributions. If your net income is less than zero, chances are you will need to make adjustments to your nonessential expense targets or your savings contributions. If your net income is greater than zero, you can decide how you would like to allocate this additional money in your budget.

Maybe you allow it to accrue in your primary checking account. Maybe you increase your savings contributions. Maybe you even treat yourself and eat out one extra Friday!


We conclude our guide with a free budget template!

As we reviewed today, budgeting is an essential part of your personal financial success. Young professionals adapting to their new roles and elevated standard of living can avoid the negative impacts of lifestyle creep by taking a proactive approach to budgeting for their income, expenses, and savings.

If you are ready to take the next step yourself, check out our free budgeting template by clicking the download button below! The highlighted cells will automatically calculate key figures based on your inputs for the other lines, so let us do the math for you:

Have you found any tips or strategies to improve your budgeting in your own life? Are there parts of budgeting you are still learning to grasp? Please share in the comments below!

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