Takeaways
- 90% of U.S. households have a budget, but sticking to it is another question.
- Budgets apply guardrails to your spending and amplify saving goals.
- Choose a budgeting system that fits your lifestyle, personality, and habits.
- Maximizing your income and expenses can dictate your financial success.
- Popular budgeting systems include the 50/30/20, pay yourself first, cash envelope, and passion budgets.
A well-put-together monthly budget is like a homing device for any financial situation. It acts as a beacon to let you know when your spending is going off course, or you are beating your financial goals. Recent surveys have shown that almost 90% of people have a budget; whether they stick with it is another issue. [1] The good news is that you can use budgeting tips and tricks to ensure you adhere to yours.
Creating a monthly budget gives you the financial guardrails to meet short-term goals like reducing spending, boosting savings, and investing for the first time. If you are new to budgeting, picking the best budgeting system for your financial situation and personality is crucial for long-term adherence.
Whether trying to reach financial independence early or simply creating a budget to get back on your feet, check out these successful hacks that can set you on the right path.
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16 Budgeting Tips Anyone Can Follow
If you want to pay off student loans, save more cash, or get your finances in order, check out these budgeting tips and tricks that will help you consistently stick to your budget:
1. Set Your Financial Goals
Financial goals are the lifeblood of your budget. Without short and long financial goals, your budget is just a wish list.
For first-time budgeters, think about your immediate needs. Do you need to ensure you have enough money to pay off your credit card debt, save for a slush fund, or make on-time rent or mortgage payments?
A budget assists you in prioritizing what is important to you. Think about what you want to achieve in 3 months, six months, one year, and five years. Most of the time, people overestimate what they can achieve today and underestimate what they can accomplish with the benefit of compounding interest and smart money habits.
Once you have met your immediate needs, you can start thinking more long-term. For example, you can buy a new car, save for a down payment, or start a wedding fund. These are financial goals that need to be mapped out well in advance.
From here, you need to choose a budget that fits your personality.
2. Choose Your Budget
There are many budgeting systems, each with pros and cons. Your job is to choose a system that aligns with your finances and personality and maximizes adherence.
Don’t worry; you aren’t getting married to the first budgeting system you choose. If you are new to budgeting and personal finance, consider selecting a budgeting system like dating. You need to find the right one that will work for you today and a different one in the future that works for you in the long term.
Here are seven budgeting systems to consider, each with its unique approach:
- 50/30/20 Budgets split your spending to 50% on necessities, 30% on wants, and 20% on savings and debt.
- Pay Yourself First Budgets maximize financial progress by paying yourself before any money goes to credit card payments or other bills.
- Cash Envelope Budgets advocate taking out cash and putting it into envelopes, which physically allocate monthly spending into designated buckets.
- Zero-Based Budgets evangelize assigning a job for every dollar of income. In zero-based budgeting, income minus expenses should equal zero.
- Passion Budgets align your spending with your passions and joys, eliminating almost everything else.
3. Plan Your Spending
Once you have chosen the best budgeting system to manage your finances, you need to plan your monthly spending. One of the best ways to do this is to analyze your past spending patterns.
You can do this by looking at your bank and credit card statements from the last three months. Highlight purchases you didn’t need, and consider cutting out unnecessary expenses or large-ticket items you can delay until you get your finances in order.
With your past spending in the rearview mirror, you can focus on laying out your budget's plan of attack. To support this process, consider categorizing your “must-have” expenses into fixed and variable costs.
- Fixed Costs are expenses that don’t fluctuate with your level of consumption (e.g., rent).
- Variable Costs are expenses that change with your level of consumption (e.g., groceries).
Your spending should align with your financial goals. For example, if you need to pay off your student loans, you need to significantly ratchet down spending on fixed costs, which are longer-term. However, consider curbing variable expenses if you need to adjust your cash outflow in the next 90 days.
4. Find a Budgeting Tool
Unless you plan on carrying your laptop everywhere, consider finding a budgeting tool that can track your spending in real-time.
Getting up-to-date reports on your actual versus your budgeted spending can help you modify your spending patterns. Look for budgeting tools that use technology to better your finances.
We recommend checking out Quicken or Empower.
If you think all that technology is unnecessary and have adopted the cash envelope system, you need only actively manage your cash in each envelope. Your remaining cash is your real-time pulse on available funds.
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5. Map Out Your Income
Mapping your monthly income is the fun part of budgeting. This process might be relatively straightforward if you earn a W-2 income with a monthly or bi-monthly paycheck. All you need to do is log in to your Human Resources website to see your net pay or check your bank statements.
However, planning your income can be more challenging for readers with irregular paychecks, like freelancers, business owners, or side hustle aficionados. Again, here, you can utilize your past income to assist in forecasting future income.
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6. Create a Monthly Budget
Now that your income and expenses are forecasted for the next several months (if you didn’t do this, we recommend going back), you can create your formal budget.
With a budgeting system in mind, write down your income minus expenses to show how much will be left over for savings or investing in stocks, bonds, or real estate.
If you aren’t sure how much you want to spend in each category, leverage the 50/30/20 budget to give you a starting point. From here, you can tailor your expenses to meet your lifestyle.
7. Develop a Budget per Paycheck
One Smart Money trick is to budget per paycheck. It can be tempting to take your monthly income and offset it with your expenses, but this does not solve one variable: cash flow management.
For example, you want to avoid being caught with a large rent bill while waiting for your paycheck to hit your bank account. By planning out what you will spend per paycheck, you can get a high-level view of how much you need to save to handle lumpy cash flow needs.
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8. Curb Your Expenses
In the world of budgeting, there are only two main levers to pull. You can increase your income or reduce expenses to meet your financial goals.
While boosting your income can be a terrific long-term solution, curbing your expenses is a surefire way to put more money into your pocket. With inflation, grocery prices have soared in recent years. Try our 10 steps to create a meal plan.
One of the simplest ways to avoid overspending is to avoid the places where you spend too much money. This could be shopping, going out with friends, or attending concerts. Whatever your weak spot is, it is essential to identify it.
9. Start a Spending Fast
Cutting back on your expenses can be hard to do alone. One behavioral hack is to put yourself into a 30-day no-spending challenge. You can do a challenge with family or friends and make cutting your spending fun.
A no-spend challenge is a proactive plan that dramatically reduces your spending. If you are married or in a relationship, check in with your significant other to get them on board. You can use your savings to pay off debt, invest, or curb lifestyle creep.
One of the main advantages of starting a spending fast is that they are completely free to start and very easy to implement. If quitting cold turkey isn’t in the cards for you, consider a spending fast on items or service above a threshold (e.g., $100).
10. Avoid Dipping into Your Emergency Fund
Virtually all financial advisors and financial planners recommend starting an emergency fund. An emergency fund is a cash savings fund kept in a high-yield checking account (or savings account) of between $1,000 and $3,000 to ward off unforeseen emergencies.
While overspending can sometimes spike your level of financial anxiety, it is vital to remember that you should not withdraw funds from your emergency fund unless you are experiencing a true emergency. Practicing financial restraint by reducing other areas of spending will help you avoid the temptation to withdraw money from your emergency piggy bank.
11. Plan a Slush Fund
One of the fastest ways to distance yourself from the paycheck-to-paycheck lifestyle is to pad your pockets with cash. Creating a slush fund, a savings fund of three to six months’ worth of living expenses, is a fantastic way to hedge against unforeseen unemployment, career transitions, mental health breaks, and mini-retirements.
You can start a slush fund with a high-yield online savings account and earn interest income without lifting a finger. For beginner investors, starting a slush fund allows you to dip your toes into fixed-income investing.
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12. Schedule a Budgeting Meeting
Whether you are budgeting by yourself or with your significant other, place a recurring monthly meeting on your calendar. Your meeting will serve as a monthly reminder to check in on your spending, track financial progress, conduct a postmortem, and plan how to achieve your goals in the coming month.
Budgets are meant to be flexible, and you can’t plan for the unexpected. However, your monthly budget meeting will allow you to see recurring “emergencies” and spending patterns.
Budgeting successfully with your spouse or partner means that you both must be committed. You can alleviate the pressure by making the process fun, but it is critical that you both attend the meeting.
13. Create Debt Goals
Many people create a budget for the first time to eliminate their consumer debt.
Whether your goal is to become debt-free this year or to eliminate your credit card debt, student loans, or car note, you need to create realistic debt goals.
One of the first orders of business is to choose what debt payment strategy you are going to adopt. Here are the two main philosophies:
- Snowball Method: Advocates for paying your smallest debts first, regardless of interest rates.
- Avalanche Method: Evangelized paying debts with the highest interest rates first, irrespective of the balance.
Next, you need to choose a target to chase. Decide if you want to pay off a dollar amount of debt or eliminate a whole debt category. Debt and interest charges can eat up a high portion of your monthly budget, especially if your debt-to-income ratio is too high.
Paying off debt frees up cash for more productive tasks, like growing your net worth through investments.
14. Set Investing Goals
Creating investment goals can help move your finances forward. Depending on your financial situation, you might aim to create an emergency or slush fund.
From there you can decide to invest in marketable securities. Beginner investors tend to start with fixed income investing then and scale up to investing in stocks.
Investment goals can be as simple as contributing $100 to your 401(k) plan each month or as complicated as purchasing real estate. According to finance professionals, investing early is the key to long-term success because it allows you to harness compounding interest.
Budgeting for your investment goals will give you a positive goal to target and track. Once you start hitting your goals, it will be essential to reward yourself.
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15. Create a Rewards System
Another smart money habit is to continuously reward great money moves. Setting up your budget is one such move that has lasting financial consequences.
For those incredibly motivated to achieve financial independence or are part of the financial independence retire early (FIRE) movement, success can be in the reward of early, mini, or full retirement.
You might want to reward yourself with a night out with your friends or family, splurge on some clothes, or book that vacation you have been putting off.
Setting up a habit loop will keep you motivated to achieve your financial goals and long-term success. Of course, it is important to acknowledge that these financial goals can change over time.
16. Revisit Your Goals
Having goals is one thing, but adhering to them over time is always where the rubber meets the road. Personal situations change, life happens, and financial goals evolve.
Your goals might change over time, and that is okay. As long as you check in on your goals periodically, you can make sure you meet your longer-term aspirations. You should revisit your one- and five-year goals at least annually to check on your progress and see if you need to adjust or pivot your goals.
Money goals support your life goals, so revisit them as your life progresses.
Smart Summary
Budgeting is assigning responsibility to all the cash that enters your bank accounts. There are many different flavors of budgeting systems, each tailored to meet the needs and demands of disparate lifestyles, goals, and financial needs. You should select a budgeting system that aligns with your personality to maximize adherence and build smart money habits.
(1) Debt.com. Budgeting Survey: More Americans are Living Paycheck to Paycheck – Even Though More are Budgeting. Last Accessed January 14, 2025.
