A budget is a plan for how you spend your money, and these budgeting tips will help you put your money in all the right places.
The word budget gets a bad rep sometimes – people think budgets are boring or restrictive.
But a good budget will help you reach your financial goals, plan for fun, and let you take control of your money, all of which are powerful reasons to keep a budget.
I realized how important budgets were when I was paying off my student loan debt. I had to make a plan to make sure that I was using my money effectively, and it worked – I paid my debt off in 18 months.
My budget has changed a lot since then, but I still keep one because I know it’s how I’ll stay in control of my money.
So if you want to pay off debt, start saving for retirement, stop living paycheck to paycheck, these budgeting tips will put you in control of your money.
19 budgeting tips to help you take control of your money
1. Know your goals
What you do with your money this month will affect how you’re able to use your money next month, next year, and in 10 years. So think about your goals when you sit down and create your budget.
I had a goal of paying off my $40,000 student loan debt as quickly as possible. I used a budget to show me where I needed to cut my spending and how much extra money I needed to make to pay off that debt ASAP.
My budget helped me destroy my student loans in 18 months.
You can plan for any kind of goal, like going on an annual vacation, retiring early, buying a house, getting out of credit card debt, etc. You’ll need to figure out how much you need to find in your budget for your goal, and then treat each goal like a bill you pay on a regular basis.
2. Make a budget with your partner
If you’re sharing expenses with someone, it’s a good idea to budget with them. I’m not going to tell you when in your relationship it’s time to start a budget together, but it’s safe to say that married couples, at least, should be budgeting together.
Your financial life is intertwined, and the decisions you make with your money will directly affect your partner.
Budgeting with your partner will help you stay on the same page about money, bring some transparency to your spending, and help you work towards your goals together.
Now, how you budget together is up to you. Some couples keep separate accounts, or get spending alerts when the other partner spends over a certain amount, and others put everything together. It’s entirely up to you, but my point is to talk about money and make a plan together.
Read 5 Reasons Why Budgeting and Tinder are Basically the Same Thing.
3. Be realistic
I brought up goals as the first of these budgeting tips, but here’s the thing: be realistic about those goals and the rest of your finances. Here’s what I mean:
- Understand that some goals will take longer than others
- Be honest with yourself about how much you’re spending – everything goes in your budget
- Be honest about how much money you make
- Realize that sticking to your budget can be hard at times
- Account for surprises, because we all know they happen
The best budget for you is a realistic budget.
4. Check the calendar
When you sit down to write out your budget, check the calendar to see if there are any birthdays, holidays, anniversaries, weddings, date nights or other planned events that will require some extra spending.
Double checking to see what’s coming up in the next month or two is a budgeting tip that will help you stay on track with your spending. You’ll have time to make adjustments before you have to cancel plans, draw from savings, or put something on a credit card.
5. Stop using the word “budget”
A lot of people think the word budget always means cheap or boring. When it’s describing something, budget just means inexpensive, and that’s not always a bad thing.
But if the word budget bothers you or feels too restrictive – even intimidating – then use a different word.
The term “spending plan” makes sense, because that’s exactly what you’re creating when you make a budget.
6. Prioritize your bills
One of the most important things is to figure out which bills are essential and which aren’t. This is identifying your wants vs. needs, and it’s important to remember when you’re in the budget planning process.
Food, shelter, basic clothing, transportation, debt repayments – those are needs. Wants are extra.
You can start to pick at those needs a little bit, like is a brand new car a need? Probably not. Does eating out every night qualify as a need (it is food)? No.
When you make your budget, account for your needs first. The wants are important too, but they should be secondary.
7. Focus on paying off your debt
I made paying off my debt a budget priority over things like a new car, new shoes, vacations…I was basically practicing extreme frugality to make those extra debt payments happen.
The reason I did that was because I realized that I didn’t want to live with debt in my budget. Between interest charges and the stress it causes, I knew I had to get rid of it as quick as I possibly could.
It was hard, but eliminating my debt freed up so much extra room in my budget. You’ll hear the same thing from nearly everyone who has decided to pay off their debt early – it’s liberating.
Read more at How to Pay Off Debt: Step-by-Step Plan (That Actually Works).
8. Use sinking funds
A sinking fund is a strategic way to set money aside for upcoming expenses. You’re saving to spend.
This is one of the budgeting tips that many of my readers practice. And they’ve told me that they create sinking things for all sorts of things: vacations, car insurance deductible, clothing, new electronics, medical care, things for their kids, etc.
Here’s how a sinking fund works:
- Every month you save money across several categories, knowing that you’ll use the money at a later date
- Use a separate savings account or money market account for each fund
- When you’re ready to spend from a category, money is already there
You don’t have to pull from your emergency fund, use a credit card, or go without.
9. Create an emergency fund
Speaking of emergency funds, this is honestly one of the most important budgeting tips on this list. And you need to start an emergency fund ASAP if you don’t already have one.
An emergency fund is money you have set aside for unexpected events. It could be job loss, a medical emergency, some kind of accident, emergency car repair, etc.
Think about how you would handle one of those events financially. Without an emergency fund, you might need to rely on a credit card, take money out of your retirement savings, or try to borrow money. All of those responses just add more financial stress to an already stressful emergency.
An emergency fund prevents this financial stress.
If you’re interested in starting an emergency fund and need budgeting tips for fitting it in, check out my article Emergency Fund: Why It’s Important and How to Get Started.
10. Budget for fun
Some people actually do nerd out for budgets, but that’s not what I’m talking about. Your budget should make room for some fun spending.
Even when I was living the ultra-frugal life to pay off my student debt, I occasionally let myself splurge on something small – usually a cheap, but nice, bottle of wine as a reward for some kind of debt milestone. The reality is that spending money on yourself feels good.
You can give yourself an allowance each month to use however you want. Most of my fun money goes towards golf these days, but do what works for you. As long as you’re being responsible and taking care of your essential needs, you shouldn’t feel guilty about your fun money.
11. Use separate accounts
There’s no rule that says all of your money needs to be kept in one account, and one of the best budget ideas for many people is to have multiple bank accounts.
I brought this up earlier when we talked about sinking funds. Just like an emergency fund should be kept in a separate savings or money market account, you can also have a separate account for your spending money or grocery budget.
Using separate accounts for different budget categories can help you organize your finances and stick to your budget.
12. Take advantage of direct deposit
Most people already have direct deposit set up on their paycheck, but that doesn’t mean it all needs to be deposited into one account.
One of the budget ideas you can use direct deposit for is splitting your money between some of your separate accounts. Automating the process removes a step and makes your life easier.
13. Use a budgeting app
If you want to automate more of the budgeting process, there are some really great budgeting apps on the market right now. Here’s how budgeting apps work:
- Sign up for the app
- Connect your accounts – checking, savings, credit cards, other debt
- The app pulls your transactions and organizes them into different categories
- You go back in adjust everything to make sure your budget works for you
Some apps let you set alerts if you’re close to going over in a spending category – Mint does this. Other apps also track your investments and net worth – Personal Capital is my personal favorite for that.
M$M tip: My readers love YNAB, aka You Need A Budget, and you can learn why in YNAB Review 2020: The Most Effective Budgeting App Around? And you can find more options in Best Budgeting Apps and Personal Finance Tools.
14. Find a budgeting method that works for you
You can keep things simple by creating a basic budget in an Excel spreadsheet that tracks your expenses vs. income. The goal being to spend less than you make.
But there are different budgeting strategies that might be a better fit. Some give you more guidance or may work better with your personal finance style.
Here are two of the most popular budgeting methods:
- Zero-based budget: You start with how much money you make and allocate every last penny down to zero. You’re accounting for every single cent of your income before it’s even spent. This is sometimes known as the Ramsey budget because it was made popular by personal finance expert Dave Ramsey.
- 50/30/20 budget: This is a budget planning concept in which you allocate 50% of your income for needs, 30% for wants, 20% for savings and debt.
15. Don’t forget about semi-annual expenses
Insurance premiums, registration fees for your car, and taxes – these bills don’t come up every month, but you still need to plan for them on a monthly basis.
You can use last year’s payment to estimate how much your upcoming payment will be, and then set a savings goal each month so you have enough saved when that bill is due.
16. Try a cash budget
A cash budget is when you withdraw cash from your bank account and set it aside for different expenses. It’s sometimes called the envelope budget.
In theory, you would have an envelope for groceries, going out to eat, gas, clothes, and anything else you can pay for with cash. You can even do a hybrid version where you pull out cash for the spending categories you struggle with.
This is one of the budgeting tips that works well for people who need a physical reminder of how much they can spend. Cash is tangible, so you’re seeing exactly how much you have available.
17. Find ways to save money
Some people are really surprised when they sit down and start tracking their expenses. I spend how much on streaming services!?
Fortunately, there are lots of ways to start cutting your budget to make room for more important things. Here are a few ideas:
- You can get rid of your car payment
- Find a less expensive cell phone plan
- Finally stop paying for cable
- Meal plan to curb your grocery spending
- Use an app to negotiate your bills
18. Increase your income and put it to work
The reality is that there is only so much you can cut from your budget. Sometimes you have to start making extra money if you want to make your budget work.
There are low commitment options, like selling things from around your house, or more involved side hustles that pay an extra $1,000 per month or more.
But what’s most important is that you put your extra income into your budget – give it a job. Maybe it’s how you pay off your debt, save for emergencies, or use for extra spending.
Your extra income might be inconsistent, and that’s okay. Budget like you regularly would, or for a lower income month, but also make a list of where you would like any extra money to go. You can number your list based on priorities.
When you get paid, you will have a plan for exactly how to spend your money.
For more side hustles, check out 22 Best Side Hustle Ideas (Make $1,000+ Per Month).
19. Adjust your budget as needed
As your life changes, you will need to make changes to your budget. This is honestly one of the most important budgeting tips because it will help you stay in control of your finances for the long term.
My wife and I, for example, are expecting our first baby, and we’ve already started making changes to our budget. We have to start planning for diapers and other baby supplies, but there are also bigger expenses we need to consider, like health care costs.
Having kids is one reason to adjust your budget, but you should do it for any major financial changes. Job loss, getting married, buying a new house, getting a raise, taking on a lot of debt, retiring, paying off a lot of debt, getting divorced, or any other big life event.
You should also make changes to your budget if it isn’t working for you. Remember, a budget is a plan, and the best budget is a one that accounts for your real income, limitations, and needs.
The final word on budgeting tips
Don’t give up on budgeting if you’re struggling to make it work. There are many different kinds of budget, budgeting apps, and ways to approach spending and saving. You need to find something that works for you.
Some people take a really flexible approach and keep the amount they need for high priority bills in one account, and any extra money can be used how they want. That’s not as organized as some budgets, but it still works.
It’s your money, so find a budgeting plan that works for you.
About Millennial Money Man
Bobby Hoyt is a former band director who paid off $40,000 of student loan debt in 18 months on his teaching salary and then left his job to run Millennial Money Man full-time. He helps other Millennials earn more through side hustles, save more through budgeting tools and apps, and pay off debt. He is a personal finance expert who has been seen on Forbes, Reuters, MarketWatch, CNBC, International Business Times, Business Insider, US News, Yahoo Finance, and many other personal finance and entrepreneurship media outlets.
