15 Practical Budgeting Tips
Practical budgeting tips everyone can benefit from.
Budgeting may not be the most exciting thing to do, but the reward for doing so can be.
1. Budget All Your Monthly Income Before the Month Starts
This is called a zero-based-budget. It means to budget every penny of income at the beginning of every month, before any money is spent. This allows you to save toward other important expenditures, before spending it and later wondering where it all went.
2. Work on a Budget as a Couple or as a Family
Budgeting as a family, or a couple, is a good way to make certain nothing important is overlooked. No matter what, there will always be expenses that catch us off guard. But that’s where an emergency fund comes in. You don’t want to use your emergency fund towards an expense you just overlooked. If you are forgetting about Little Johnny’s baseball uniform, he will remind you during family budgeting night.
3. Start By Budgeting for the Most Important Expenses First
This is especially important if you don’t have an emergency fund built up. By budgeting your most important expenses first, you can help safeguard yourself against stressful financial shortfalls. You want to budget your car payments before family movie night at the local theater. Family night can still happen regardless, but in the case of a shortfall, it may be pizza and movie night at home instead.
4. Use Budgeting Apps to Help Track Your Spending
There are some amazing apps (some free) that can help you budget your money. One such free app called mint helps you track spending and reach goals by categorizing your transactions. It’s very helpful to see what essential and non-essential expenses are, as well as how much you are saving. Essential expenses would be things such as house payment, groceries, utilities, fuel for your vehicle(s), etc. Non-essential expenses would be things such as going out to eat, renting a movie, going to a concert, etc. This tool helps you make certain your non-essential expenses don’t go above a certain amount, allowing you to save a certain amount each month.
5. Save Before Spending
You’ve probably heard the phrase “pay yourself first”. Unfortunately, it’s more common for people to spend non-essential money first. Then, save what’s left over, if there is anything. A good habit is to treat saving as if it were an essential expense. Once you see savings building month after month, saving first becomes exciting.
6. Auto Save a Certain Amount Every Pay Day
Make certain to pay yourself first by having a percentage of your paycheck go directly into savings. This tip coincides nicely with tip #5 and makes the saving process hands free. This means whatever is left, you can look at as expendable income. After essential expenses are paid, of course.
7. Maintain an Emergency Fund
There’s not a one size fits all emergency fund amount, but at minimum it should be $1,000. That should cover most deductibles and go a long way to cover an unexpected expense. If you must use a portion of your emergency fund, make certain to fund it back from what you auto-save each pay day until it’s topped off again. This is also a good method to increase the amount of money in your emergency fund. In general, your emergency fund should equal 3 to 6 months of your monthly expenses.
8. Be Realistic With Budgets
When it comes to certain expenses such as food, it’s easy to under budget. That’s because we often budget based on things such as eating in more than we do. Or we budget for less money at the grocery store than we end up spending. A good rule of thumb on expenses that are hard to calculate exactly is to first track what you spend on food (eating in or out) for a month. Another tip you can try before you have a chance to track your food spending is to figure it as close as you can and add 20% on top of it. Once you have a hard figure, you can use that going forward and adjust as needed.
9. Use Coupons
Clip and use coupons for anything you can. This is especially helpful for stretching your money when used for everyday items. Some of the most common coupons are for fast food, groceries, and everyday items such as laundry detergent. 10% savings here, 15% there, it all adds up in a months’ time. There are many e-coupons online that can easily be printed off. You can also stack a manufacturer’s coupon with a store coupon and double save on some items.
10. Use Separate Accounts For Expenditures
By separating accounts based on essential expenses, non-essential expenses, and savings, you can make budgeting much easier. This works great for things such as making certain you have money to cover essential expenses. For example, by not co-mingling your house payment money with your entertainment money, you avoid being short for essential expenses. This also makes spending money for non-essential items more stress-free. You don’t need to worry about having the money to go out to eat since it’s coming out of a separate account.
11. Save For Big Purchases and Expenses
Typically, what comes to mind when thinking of this tip is vacations. Many people save for vacations ahead of time to avoid laying out a large sum of cash all at once. But this rule can apply to other large purchases such as a new sectional. For instance, you want a new sectional that costs $2,000. If you want to have the new sectional before Thanksgiving that is 6 months away, you only need to save $77 weekly for 26 weeks. Saving $77 weekly is much easier to handle for most people compared to handing over $2,000 all at once.
12. Update Your Budget on a Regular Basis
If there is one thing everyone’s expenses have in common, it’s that they change to some degree month to month. This is not only due to unexpected expenses, but even mostly fixed expenses can fluctuate. For instance, the monthly cost of a service such as electricity or water can go up. Or a monthly orthodontist bill you’ve been paying on for two years can get paid off. Your budget will fluctuate month to month so updating your budget monthly to account for these changes is a good idea.
13. Set Milestone Goals/Rewards
The great thing about living on a budget is that it allows you to budget in fun as well. The fun things you get to do as a result of good budgeting can be the inspiration to continue budgeting. Maybe you take two or three weekend trips every year and a longer trip in the summer. This always gives you something right around the corner to look forward to. You can look at it as a budgeting reward every few months.
14. Take Advantage of 0% Interest
Let’s say you need new appliances, but you don’t want to shell out all the cash needed for the full purchase. Look for a deal like Home Depot’s 12 month no interest for purchases using their store credit card. This can allow you to not pay a penny in interest and still spread the cost out over 12 months. Just make certain to pay off the balance before the zero-interest timeframe is up or you may be charged the entire interest amount.
15. Plan Meals Before Grocery Shopping
One of the biggest reasons people eat out during the week is because they don’t have what’s needed to make a meal at home. This is typically because of bad meal planning, or not meal planning at all before shopping. Another great benefit to meal planning is that you then know what coupons to look for before shopping.