Many of us fear the terrible “B” word — budgeting. So many people fear making a budget that they never learn how to, but there’s no need to fear. Learning how to budget your money is simply learning to create a plan for it. Every dollar that comes into your life has a job, because your budget allocates it to a certain area. It gives your spending a purpose. That’s not so intimidating, right?
Here are our tips and tricks to learn how to budget your money so you can enjoy the freedom that a budget brings.
1. Set Your Goals Before Learning How to Budget Your Money
Have goals in mind for what you’re saving for. Is it a new car? A house? A vacation to a far-flung destination? Write your goals down and look at them often so you never forget what you’re saving and budgeting for.
2. Budget and Think Ahead of Each Month.
Your budget should be focused on the 30 days ahead so you can plan for future expenses instead of worrying about what has already happened. Complete your budget before the end of each month so you’re ahead of the game. This is how you give each dollar a destination so you know where all of your money is going. Know you’re going to be needing to buy books for your school, think ahead on how you can save money by buying cheaper textbooks.
3. Give Every Dollar a Job
That means budgeting to zero. If you earn $6,000 a month, then you need to allocate $6,000 worth of expenses. By doing this, you gain control of your money instead of it controlling you. Budgeting to zero avoids that false sense of security from thinking you have an unspecified amount of money leftover every month.
4. Set a Realistic Budget
Your budget is determined by one person — you. You decide where your money should go and, in turn, decide what is a priority in your life. If saving for your emergency fund is important, then make sure you’re not overspending on clothes or going out and leaving very little for your fund.
5. Make a Budgeting Appointment
Set aside a day of the month that you budget your money. Whether it takes 30 minutes or an hour, create a recurring appointment on your calendar for budgeting.
You can also set a schedule for payments like your phone bill, internet bill, and student loans. This helps to alleviate some stress when it comes to remembering due dates.
6. Give Yourself Some Wiggle Room
Set aside a small amount of your income each month for unexpected expenses and emergencies. This is especially important when first learning how to budget your money. You can cover your expenses that way without removing any money you’ve put elsewhere. Make a note of all expenses that end up in this category and if they appear enough times, you might want to give them their own category.
7. Track Each and Every Expense as You Learn How to Budget Your Money
Make a habit of noting down every time you take out your cards or cash to pay for something. Whether it be on a notepad or on your phone, mark down the item and the cost so you track your expenses every day. Don’t skip this step! This helps you to become more conscious of your spending and you can see how you’re doing throughout the month.
8. Save First
Set aside savings each month as soon as you get paid. This is called “paying yourself first” and is a great way to make sure that saving is a priority and is the smartest way to learn how to budget your money.
Think ahead for big purchases like vacations, birthdays, and holidays. It feels really great to buy gifts after you’ve had enough money saved for them. You remove all of the guilt associated with making big purchases on credit. Treat these purchases like a monthly line item so you can save for them ahead of time.
9. Consider Going off of Credit
Sticking to a budget means you no longer buy things on borrowed money. Consider getting rid of your cards for this purpose. Put them in ice, cut them up, hide them somewhere — anything you need to do to stop using them.
Getting your credit card balance down to zero not only feels great, but it breaks you out of the cycle of paying more for your purchases due to interest. Use your debit cards and cash instead and you’ll see how freeing it is.
10. Make Adjustments as You Go
With your budget in place, you become the person in control of your money. If you need something and have extra budget left over in another category, you can move your money around to allocate it to what you need. Did your phone charger break and you need a new one? If you are out of money in your shopping category, but have some leftover in your electricity category, then re-allocate those funds to buy what you need.
11. Differentiate Between Needs and Wants
You might want to get tickets to a concert, but you need to fix your car battery. Assess how much money you have allocated for both expenses and see if you can afford both. If you can, that’s wonderful! If you can’t, then you need to fulfill your need before you think about your wants. Understanding the difference will help you to stop impulse buying when you trick yourself into thinking a want is a need.
12. Include a Line Item for Fun
There’s no point in budgeting if you don’t budget for the things you enjoy. Budget for things like going to the movies, dining out, grabbing drinks with friends, and anything else you like to do. The important part of this is to stick to the amount you’ve allocated. Don’t go over this amount, because you’ll be cheating yourself out of the control your budget had given you.
13. Account for Semi-Annual Expenses
Many people’s budgets get out of whack because they don’t account for expenses that occur once or twice a year. This could be insurance, vet checkups, gym fees, and other recurring costs. Set aside a small amount each month that’s dedicated to these fees so you’re not hurting when it comes time to pay.
14. Try the 50/20/30 Plan to Learn How to Budget Your Money Simply
Senator Elizabeth Warren, the woman famous for inspiring the quote “nevertheless, she persisted,” wrote about the 50/20/30 plan in her book titled All Your Worth, which focuses on budgeting with simplicity. You dedicate 50% of your income to necessities, 20% to long-term savings, and 30% to the rest of your life. This can be a good way to start for those who have a hard time deciding how much to allocate to what areas of their life.
15. Regularly Update Your Budget
Set a reminder so you update your budget categories every month. Your amounts may change depending on what’s going on in your life. There’s not need to stick rigidly to certain amounts, because that’s unrealistic and may set you up for failure. Base your adjustments on the categories that you spent too much or too little on in the previous month.
16. Use Budgeting Tools That Work for You
Thanks to modern budgeting tools, it can be really simple to get your budget in line. You can find apps and websites that pay your bills for your or alert you when your account is running low. You can also use some old-fashioned techniques to plan your spending. The plus side? Many of them are free. Here are a few of our favorites:
- You Need a Budget is for the budgeter who wants a hands-on experience. You need to pay $50 a year for the service or $5 a month. The software imports transactions from your bank accounts and you are then responsible for categorizing them.
- An Old-Fashioned Notebook. Use a small notebook that you can carry around to track all of your expenses. It’s the low-tech, simple way to do it!
- Use envelopes with dedicate categories like restaurants, groceries, gas, and only spend what’s in them. When the cash is gone, you’re done!
- Google Sheets. Download a budget template and input all your information. Use a bi-weekly or a monthly template, depending on how often you get paid. This is good for people who don’t mind editing spreadsheets and like to enter their transactions manually. This can also help you to become more aware of your spending.
Most importantly, be kind to yourself when you’re learning how to budget your money. Give yourself some grace so you can be a bit forgiving. The initial stages of budgeting are just like starting a new exercise plan. The beginning is usually the hardest part and you’re likely to fall out of the routine every once in a while, but once you get into the habit of it, it becomes easy.
Adjust as you go along and don’t be too hard on yourself when you mess up. It can take a while to become comfortable after you learn how to budget your money. And if you mess up, there’s always next month!
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Student Debt Relief Loan Refinancing Advertiser Disclosure
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
SoFi: Fixed rates from 3.890% APR to 8.074% APR (with AutoPay). Variable rates from 2.550% APR to 7.115% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.550% APR assumes current 1 month LIBOR rate of 2.50% plus 0.04% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.