The Budget Fashionista’s Intro to Budgeting

Updated on August 6th, 2025

You’ve seen the headlines, ladies. Economists are predicting recession following our new president’s penchant for tariffs. We say bring it on, economy. Because we’re ready to pull out our pencils and start budgeting. 

Budgeting isn’t about pinching pennies. It’s about understanding where your money goes and setting priorities — so you can look fabulous and enjoy your life without breaking the bank. Whether you’re conquering credit card debt, building an emergency fund, or working towards a rich retirement, creating a budget is the first step toward financial empowerment. 

Use this budgeting guide to take a huge step towards reaching big financial goals, recession-proofing your finances, and living a life you love. 

Understanding your budget

Let’s get on the same page with some definitional points about budgets and their value. 

What is a budget?

A budget is a plan for how you spend your money. It defines your income and allocates it to various spending categories. Think of the budget as a roadmap that supports thoughtful financial decisions.

Budgets have a reputation for being restrictive, but I find a good budget to be liberating. Why? Because you set the priorities. If you want a healthy monthly sum to support your shoe fetish, you can have it. As long as your spending plan balances, you can shop shoes guilt-free. The secret is in choosing what’s important and then having the discipline to cut back in other areas.

Why budget?

With a budget, you know what your lifestyle costs and you can confidently plan for and reach big financial goals.

Without a budget: 

• You might not know if your paycheck will cover the bills this month.
• You might be reaching into your savings regularly to pay off credit cards.
• You won’t feel confident about paying off debt or saving money.
• You can’t plan for retirement — or anything else really — since you’re not sure what your lifestyle costs.
• You may buy designer shoes and then realize you’ve spent money that should have paid your car insurance premium.
• You may pay bills late or roll over credit card balances because you don’t have the cash.

Mindset benefits of budgeting

The benefits of budgeting extend beyond a balanced checkbook. A workable spending plan reduces anxiety and overthinking. You don’t have to live in the dark, wondering if your paycheck will last this month. You don’t have to stress about a single splurge purchase. If it fits in your budget, it’s all good. 

 As you learn to live into your budget, you gain confidence that you can achieve your financial goals. Seeing the results of following a budget — be it a lower debt balance or higher savings — is motivating. You’ll realize that having full control of your finances is as easy as setting priorities and following them. 

Create a budget in 3 steps 

You need to define three things to develop a high-level budget: your income, your priorities, and your method. 

1. Calculate net income 

The first step in creating a personal budget is determining your monthly income. There are two main ways to define your income: 

1. Gross income is your salary, before taxes and other deductions. Start with gross income if you want to plan for retirement contributions.
2. Net income is your pay after taxes and deductions. If your primary income source is a job, your net income is the amount of your paycheck. You can use net income as a starting point if you feel comfortable with the retirement contributions you’re already making. 

Your pay stubs should detail your gross and net income. 

Pro tip: If you get paid every two weeks, use two weeks’ pay as your monthly income. This is an understatement, since you’ll get three paychecks in two months each year. Use the extra checks to bolster your emergency savings account or repay debt. 

2. Identify priorities 

Next, list your financial priorities. Common ones are:

• Save for retirement.
• Debt repayment.
• Save for a house downpayment.
• Save for a car.
• Saving for a vacation. 
• Create an emergency savings fund. 

You may want to do all of these things, but pick one or two for now. You can adjust things as you make progress.

Here are some points that may clarify your priorities: 

1. Credit card debt can be toxic to your finances. It’s difficult to achieve other financial goals when you have high credit card balances. You may need to pay down debt before you can tackle other financial goals.
2. Reaching retirement savings goals can take decades. Start early and invest often for best results.
3. An emergency savings balance can be a financial lifesaver if you lose your job or experience health problems. If you are living paycheck-to-paycheck, consider socking away some cash so you’re prepared for the unexpected.

3. Allocate 

Priorities in mind, it’s time to allocate your income to financial buckets. Start by assigning percentages of your take-home pay plus any retirement contribution you’re already making to two things: 

1. Your top financial priority.
2. One general “discretionary spending” category. Discretionary spending includes all the optional things, like clothing, dining out, streaming services, salon visits, and travel. 

Whatever’s left covers your expenses like rent, utilities, and groceries. You can be super detailed and create a top spending limit for each of these expenses — but you may not have to. If your spending on groceries, gas, and other essentials doesn’t change much from month to month, don’t waste your time tracking these individually. 

Budget allocation tips 

Allocating your income to different spending and saving categories can be tricky, especially if you don’t know how you’re currently spending money. There are a couple ways to make this easier: 

1. Review your spending history to set spending limits. Take this step for a more precise starting budget.
2. Use a budget framework like the 50/20/30 or the 70/20/10 and adjust as you go. Start with a framework if you need to get control of your spending right away and you don’t want to sort through your past habits. Whatever framework or budgeting system you use, make sure you account for savings and debt repayment.

Whichever place you start, document your monthly budget plan somewhere, on a notepad, budget worksheet, spreadsheet, or app. It can be as simple as a list of high-level budget categories with percentages that add up to 100%, like this: 

• Retirement contributions: 5%
• Debt payments: 10%
• Emergency fund saving: 5%
• Discretionary spending (things you want but don’t need): 30%
• Essentials: 50%

Since you will have to track your actual spending against these categories, it may be helpful to write down which of your expenses fall into which category. You can also use this budget spreadsheet I created that categorizes expenses and calculates percentages for you. This spreadsheet also converts annual or quarterly expenses to monthly amounts so you can build a complete budget off monthly expenses or equivalents. You can populate the numbers by looking over your bank statements to see what you’re really spending. 

Ready to make a budget? That’s a big step. Next time I’ll provide some tips and resources to help you balance the budget. Because you may find your budget percentages add up to more than 100%. When that happens, guess what your top financial priority becomes? You got it — making your budget balance.  One common issue is underestimating your expenses, which can lead to a big budgeting mistake explained. It’s crucial to track your spending accurately and adjust your categories accordingly. By doing so, you not only keep your budget under control but also pave the way toward achieving your financial goals.