In a NutshellThe key to budgeting successfully is to be realistic. But whether you’re a beginner or a budgeting veteran, techniques like automating your savings and using online tools can help.
Budgeting is an essential skill, but it can be hard to know where to start.
Here are six tips for successful budgeting.
- Be realistic
- Consider automating your savings
- Use online tools
- Try budgeting for additional expenses
- Find a plan to deal with debt that works for you
- Adjust as needed
Budgeting isn’t easy — it can feel like a restrictive diet. The key to budgeting effectively and saving money is being realistic.
In other words, try to make room in your budget for things you value, including entertainment. If you need to make significant changes, consider cutting back little by little and enjoying things in moderation.
Just like your eating habits, you probably won’t be able to completely alter your spending habits overnight. A well-balanced budget can consider your needs and wants as well as your savings.
Think about setting up automatic withdrawals from your checking account into your savings account at least once a month. It’s a common goal to aim for saving 10% or 20% of your income — but if that’s too high, try starting with 1% and working your way up. If you’re able to get by on a little less, you can set it and forget it.
Jacob Wade, founder of the blog iHeartBudgets, recommends looking at your monthly income and expenses to determine how much you can afford to save. How can you put this into action? Wade offers this example.
“If you have $300 left over every month and get paid twice a month, have your bank automatically transfer $150 each payday to your savings account. You never see the money hit your checking account, which reduces your temptation to spend.”
To keep an eye on your budget, consider using online tools that can track your income and expenses — these tools offer an easy way to create a budget. Understanding how much you’re getting paid and where you spend is key. These resources may help you quickly see where your money is going and where you can cut back.
Mint is a free online tool that allows you to create a budget, track your income and expenses, and set savings goals. You’ll get weekly reports in your inbox so you can keep tabs on your spending.
It may seem counterintuitive to pay for budgeting software if you’re trying to get your expenses in control, but You Need a Budget, or YNAB, is another option to check out. It can help you set up a budget, save for a rainy day and set aside money for larger, infrequent expenses. YNAB is based on a four-rule system: giving every dollar a job, embracing your true expenses, rolling with the punches and aging your money. It costs either $11.99 a month or $84 a year.
One of the things that can get in the way of budgeting is surprise expenses such as car repairs or illness. Even recurring expenses like annual insurance payments or paying your taxes may catch you off guard.
It’s generally easier to budget for regular monthly expenses like rent, food and transportation. But all of us have expenses that are hard to budget for, and we’re likely to forget about them until the payment is due or we’re hit with a big surprise.
To remedy this situation, consider adding an extra category in your budget as a buffer for these expenses this situation — set up an emergency fund.
5. Find a plan to deal with debt that works for you
If you have debt from credit cards or loans, making a plan to tackle it could help you feel more in control — and help you set your budget successfully.
6. Adjust as needed
A budget is a spending plan that should reflect your life and match up with your goals and lifestyle. In order to budget successfully and save money, review your budget every few months and adjust as needed.
This is especially true if any major life events occur, such as a job loss, a wedding or the birth of a baby. Let your budget grow and change just as you do.
Ultimately, your budget should help you reach your financial goals. Putting a plan in place can help you easily track your income and expenses, while also helping you save money and keep your spending in check.
Though budgeting may seem like work, these tips can help you streamline the process so managing your money and saving become second nature.
Plan your spending with our budget calculator
You can use our budget calculator to get a clearer picture of how much money you’re spending, what you’re spending it on and where you could improve.