- Set Goals Before Making a Budget
Think about what you want in the next 5 to 10 years and figure out what you need to get there. Decide where you want to be financially next year and the year after. Knowing what you want to do with your money will guide you as you figure out how to budget, and it will greatly increase the likelihood that you’ll stick to it. Also, any sound financial foundation starts with an emergency fund.
- Find a Plan That Works for You
Trying a zero-based budget, where you start by prioritizing your expenses from essential to nonessential. Next, assign every dollar in your paycheck a place on the list until you run out. You can disburse the remaining money for goals and fun. If you prefer to be a little less rigid, a 50/20/30 budget is a great option, where you allocate 50% of your income to your needs, 20% to savings, and 30% to wants.
- Use an App or Envelope System to Track Spending
A budgeting app is great for updating your budget on the go and taking an intense look at your spending. If you still can’t stick to your budget, the envelope system can help without constant tracking. After you decide how much money goes toward each expense, put the money you’ll spend for each expense for the week into separate envelopes and keep them with you. Once an envelope is empty, you’re done spending for that expense. You can keep receipts in the envelope and examine them later.
- Use the Past to Predict Future Income
You must calculate your income and the amount of money you want to put toward every category or individual expense. Look back at your income from the past six months and then find your average monthly income and the average amount of each paycheck. Expenses like utilities can be unpredictable. Check your statements to compare each month so you can make future budgets. You may not be able to treat yourself when your gas bill will be $300, but it might be manageable during a month it’s going to be $75.
- Make a Monthly Budget AND a Budget for Each Paycheck
Since most bills are monthly, it’s important to make a budget for the entire month. However, by breaking that down further into paycheck-by-paycheck budgets, you can better pace your spending. You can make categories as vague or as specific as you want, but put as many barriers in place to prevent yourself from overspending in the first half of the month.
- Remember the Obvious: You Need to Spend less
The hardest part of budgeting is sticking to your plan. If you’re always spending more than you make, your top priority is to find ways to save money. The most important thing you can do is spend less. Some tips to cut spending are:
- Make a meal plan and stick to your grocery list. Prep meals on Sundays so you’re less likely to eat out during the week.
- Opt for free events in your area instead of pricy activities
- Try running and body-weight workouts instead of paying for a gym membership.
You should start by slashing expenses that make a big dent in your budget instead of shaving pennies off manageable ones.
- Use the 30 Day Rule to Stop Impulse Buying
To curb impulse buying, follow the 30-Day Rule: When you want something that’s not in your budget, make note of the item in question for next month’s budget and revisit it in 30 days. If you still want it, you can consider buying it if you can afford it.
- Things Will Go Wrong
Things will change and go wrong. The most important tip for budgeting is to not give up. When things do go wrong, alter your budget to compensate. Move money from one category to another or try a side hustle to add some income.
- Hold a Monthly Budgeting Meeting
If you have a partner, you need to have a monthly meeting that both of you are required to attend. Whoever enjoys budgeting more can make the budget, but the other person must contribute something. The budget can still be flexible and change as needed, but both partners should be consulted about big changes.
- Negotiate Bills to Save Money
Contacting your phone, internet, and insurance providers to negotiate your bills and you could lower your bills once or twice every year.
