Budgeting can be very overwhelming. There are so many different methods, tips, and strategies. When you are creating a budget, you need to find what works for you. That does take some trial and error. Understanding how to exercise patience and discipline is your key to creating a successful budget you can stick to.
Whether you are a complete beginner with budgeting or you’ve been budgeting for a while, I wanted to share my top budgeting tips that everyone should try.
If you are finding it difficult to stick to your current budget, it is time to switch things up and try these new tips.
What is a budget?
A budget is a living document that shows you where your money is going. You subtract your expenses from your income. The money leftover is what you have to allocate to your extra debt payments or your savings goals.
Budgeting isn’t about depriving yourself. The purpose of budgeting is to make a plan for your money. This plan can change depending on the season of life you are in and your goals. You want your budget to be as personalized as possible and make sure you can easily adapt it.
Most people do a monthly budget but I recommend budgeting per paycheck. There is no correct way to budget. Some people prefer a spreadsheet and others prefer pen and paper.
Budgeting doesn’t have to be complicated but you need a budget in order to fully understand where your money is going. Before you can even set big money goals, I highly recommend creating a budget.
Your first budget will not be perfect. It will take trial and error to find a budgeting method that works for you. Stick with it and follow these budgeting tips to help you.
1. Track your expenses
If you’ve never actually tracked an entire month of expenses, I need you to do that as soon as possible. You cannot create a budget without tracking your expenses. How do you know what your budgeted amount should be for each category?
You will most likely be very surprised at the numbers. When my clients track their expenses, they are always shocked at how quickly expenses add up.
Those $20 Amazon purchases or $10 fast food lunches add up quickly.
I want you to pick an average month and track every single thing you spent. This includes your bills. You will then know the actual amount you spent and can budget based on that number.
You can decide if you want to increase or decrease your budgeted amount once you know your actual numbers.
This is especially important if you are trying to budget with irregular income. You will need to know exactly how much you spend each month so you can plan ahead.
I know tracking expenses is time consuming but it really is the only way to know exactly how much you spend.
Once you feel comfortable with your budget, you don’t have to track every category. Then you should only track the categories that you continue to struggle with. For most people this would be food (groceries and take out) or online shopping.
2. Keep your budget in sight and in mind
So many times we create our budget on a piece of paper, a phone app, or a Microsoft Excel spreadsheet and then we don’t check it until the end of the month. We want your budget to be accessible so you can check it at least once a week to see if you are on track with your budget. Budgeting takes time and effort especially in the beginning.
It does get easier and faster. If you are struggling to stick to your budget, make sure you keep your budget accessible.
If you use Excel, you can create your budget in Google Sheets so you can quickly access your budget on your phone or computer. If you write your budget on a piece of paper, make sure that it is on your desk or even on your refrigerator so you see it every day.
The last thing we want is your budget in a drawer that you never check or in a folder lost on your laptop.
If you are budgeting with a partner, make sure that you both have access to your budget so you can have discussions throughout the month. Open communication is key and the more accessible your budget is, the easier it will be to have those conversations.
3. Make adjustments to your budget
A budget is a living document so it won’t be perfect. No one has a perfect budget. If you want to create a budget you can actually stick to, you have to be willing to make adjustments throughout the month.
You cannot just set your budget at the beginning of the month and check it at the end of the month. I recommend reviewing your budget once a week to evaluate how things are going.
You want to evaluate what budget line items you might end up over budget and what budget line items you might be under budget. As the month progresses, you will be able to adjust your budget to reflect actual numbers.
For example, if your grocery budget was set at $400 and by week two of the month you are at $300 spent, you have a few options:
- Commit to spending only $100 for the rest of the month
- Increase the budgeted amount and decrease another budget line item so you don’t go over budget
So many times people wait until the end of the month to review their budget and then they are frustrated they went over budget. By checking your budget more often and making adjustments, you are proactive instead of reactive.
The people who are most successful with their budget check in throughout the month. If you check your budget once a week, you will be able to clearly see how you’re spending your money and if you have to focus on any spending habits.
If you check and see you spent $200 at Target in a week, you can adjust your budget for the rest of the month and you can take time to reflect on why you spent the money.
Was it a budgeted expense? Was it an emotional purchase? Did you forget you had to buy a gift? When you check in with your budget you will be able to see your spending patterns and make adjustments if needed.
4. Set up sinking funds
If you have never heard of sinking funds, I am about to change your life forever. Okay, maybe I am being a little dramatic but seriously sinking funds are one of the best ways to save money efficiently and effectively.
Once I introduce the idea of sinking funds to my clients, it is always life changing.
A sinking fund is when you save for a specific goal or future expenses. This doesn’t include your emergency fund.
There are specific sinking funds such as car insurance, annual fees, or car registration. There are general sinking funds such as repairs, pets, travel, or clothes. Both are equally important and should be added to your budget based on your goals.
By using sinking funds, you won’t be as overwhelmed when bigger expenses are due because you will be saving for them throughout the year. You will also be prepared for unexpected expenses.
For example, by setting up a repairs sinking fund if you need an oil change or new tires you will have the money in that fund. You won’t have to worry about adding debt or trying to move money around.
Sinking funds serve a purpose and I highly recommend writing down 3-5 sinking funds you can start saving for today. Don’t worry if you can’t contribute much. The important thing is starting and building the habit. Even if it is just $25 a month. It will add up.
If you don’t have an emergency fund, you want to start saving for that first before sinking funds. Your emergency fund should be at least $1,000 but preferably a month of expenses. If $1,000 isn’t possible right now, just pick any number to start. I just want you to start saving now.
Sinking funds should be line items in your budget so you make sure to transfer to them money every single month.
5. Add extra debt payments
You will want to make sure your budget includes all of your extra debt payments. Of course your minimum payments will be in there but you want to allocate your leftover money to debt or savings.
If you wait until the end of the month to make extra debt payments, most likely you will spend some of that money.
For example, if you have $500 leftover in your budget after paying all of your expenses and saving for your goals then you should make that extra debt payment right away.
If you want until the end of the month, that $500 will probably end up $200. You will justify some expense throughout the month instead of throwing it to debt.
Almost half of Americans have credit card debt. If you have high interest debt like credit card debt, you will want to make sure that is paid off as soon as possible. By adding extra debt payments to your budget, you will become debt free a lot faster and pay less in interest.
Make sure you specify in your budget which debt the extra payment is for. Don’t just write “extra debt payment” in your budget. Be specific and say “American Express card” so you know exactly which debt you are focusing on.
You want all of your extra debt payments and extra savings transfers to be specific in your budget. This way it will be extremely clear what goals you are working on and where your money is going.
Bonus: A great way to payoff debt faster is to get a second job or start a side hustle especially online. Check out this step-by-step guide on how to make money online.
6. Set specific financial goals
The more specific your goals are the better. I don’t want you to write goals like “I want to be debt free” or “I want to save money”. Those are way too general and will be really hard to track.
If you want to become debt free this year, how will you do that? How much debt do you have to pay off? What type of debt? What is the starting step?
If you want to save money this year, what do you want to save for? What is your specific savings goal? How much do you want to save? How much do you want it saved by?
The more specific your goals are, the easier it will be to add your goals to your budget.
If you want to save $12,000 by the end of the year for a new car then you will need to save $1,000 a month (if you start in January). You will add this as a budget line item to stay on track.
If you know you want to save for future home or car repairs, you can save $200 a month in a sinking fund. You would add a budget line called “repairs” so you remember to transfer the money every single month.
Setting specific debt payoff or savings goals is crucial to creating a budget you can actually stick to.
Budgeting doesn’t have to be hard. These simple budgeting tips will help make it much easier and more effective. If you need additional help sticking to a budget, paying off debt, and saving for the future then you have to check out my signature program Flourish FinanciALLI.
Don’t forget to give yourself grace when you are first starting out. Sticking to a budget takes practice and no one is perfect.
Alli Williams is a money coach and the founder of FinanciALLI Focused LLC. Her FinanciALLI Focused Framework helps women transform their money mindset and develop a flexible plan to spend, save, and pay off debt all at the same time (yes, it is possible). She does not believe in deprivation or barebones budgeting but spending intentionally and making your money work for you (no need to cut Starbucks lattes). Alli and her husband paid off over $50k of debt while saving $40k for a down payment, saving for retirement, cash flowing their wedding, and still spent money on the things they value (which for her is college football season tickets). She currently lives in South Carolina but was born and raised in NY. She has her MBA in Finance from the University of South Carolina. Her signature program, Flourish FinanciALLI, has helped dozens of women pay off thousands of debt and save for their big money goals in 12 weeks (or less). You can find her on Instagram @financiallifocused or her website www.financiallifocused.com.