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!