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It’s true: Many people hate the B word. I’m talking about BUDGETING.
These days, budgeting is not in style. Most of my friends do not have a budget. Unbelievably, the state of Illinois recently went an entire fiscal year without a budget.
But the unpopular truth is that budgeting is the number one way to make sure that you are on track with money.
I like to think of my budget as a road map. It tells me where to go and how to get to my chosen destination – hopefully as efficiently as possible.
But I am still the one who puts together the map and follows each step. Putting together a road map is easy, and so is making a budget – sticking to a budget can be much harder.
It has been many years since I created my first budget. At the time, I had no idea how to manage money. I had just read The Total Money Makeover, but I didn’t know the first thing about budgeting an “adult” paycheck.
This was going to be the first time I had ever earned a paycheck which included a comma in the amount field! So I did the responsible thing – I sat down and made the budget you see below. As you can tell, my first attempt at a budget was a failure. I overspent my budget in many categories and spent more than I earned overall (way to go, Finance Superhero. . . )
15 BUDGETING TIPS EVERYONE SHOULD KNOW
Looking back, I wish someone had sat down with 21 year-old me and showed me how to budget. Figuring it out on my own through trial and error was tough.
Today, my wife and I are on the same page with money thanks to our budget. And if it sounds like an exaggeration, the truth is it’s not: Our budget is one of the most freeing things to ever happen to our marriage!
Whether you’re looking to start your first budget or fine tune your budgeting skills, the following 15 tips will help you make a budget that will work for you!
1. Make a Budget Every Month
Every new month brings new expenses and circumstances, which makes this first budgeting tip the most important: You need to create a new budget every single month.
You can use previous monthly budgets as a template, but your budget needs to be realistic if it is going to help you. For example, your expenses in December (holiday gifts, wrapping paper, decorations, baking ingredients) look completely different than those in July (sun screen, bug spray, Popsicles).
Plan ahead for variable expenses and include them in your budget. It only takes a few seconds to update small changes from month to month, but the benefits are huge.
2. Manage Housing Costs
If you’re a homeowner, housing is likely to be your biggest fixed expense until you pay off your mortgage. If it has been a while since you have considered refinancing, now is a perfect time to consider your options and possibly save hundreds of dollars each month.
Since interest rates have been slowly on the rise for the past several months, I recommend you take a few minutes to check out your options with Lending Tree, a leader in the mortgage loan industry.
I make it a habit to keep an eye on available rates, and the last time I checked, it took me less than 3 minutes to examine refinancing rates. With rates now above 5%, I’m pretty much stuck with my 4.5% rate for a while, but if your rate is near 6%, now is the time refinance.
On the other hand, if you just starting out and are renting, finding a roommate can help you hack away half (or more) of your housing costs from your budget each month.
Case in point: When I got my first job, I avoided spending $1,000 per month for a one-bedroom apartment and spent $400 to rent a room in a two-bedroom condo. By sharing costs I avoided spending 40% of my net income on housing costs.
The harsh reality is that housing will likely be your biggest area of spending in your budget, so doing everything you can to reduce your costs in this area will do wonders for you budget.
3. Include All of Your Debt Obligations
When budgeting you may feel tempted to leave out debt payments, especially if you have student loans in deferment. But avoiding your debts will not make them go away, so gather this information, including total principal, interest rates, minimum payments, and loan terms for each debt.
If you’re not sure how much you owe and to whom, you can find out for FREE by creating a Credit Sesame account. Or if you’d rather do it the hard way, you can also contact the appropriate customer service departments, if you have their information, to gather loan balances. Once you have a clear picture of your debt, include the monthly minimum payments in your budget.
A quick word about credit card debt: If you’re facing high interest rates, you should definitely call to negotiate better rates, especially on credit cards. Be persistent and don’t take no for an answer. You’ll be surprised at the results.
If student loans are eating up a huge chunk of your budget, I can’t stress it enough: it is FREE and easy to check out refi possibilities, and it won’t damage your credit one bit. I don’t have student loans these days, but I recommend taking the time to gather your options – companies like SoFi and Purefy can help you gather your options.
4. Cook at home
Preparing your own meals at home will accomplish two goals:
1.) You will save money, and
2.) You will not gain weight eating low nutrition/high calorie fast food.
If you’re willing to learn basic cooking techniques and how to use spices effectively, you can slash your food budget significantly.
And if planning isn’t your strong-suit, $5 Meal Plan will do it for you and send meal plans to your inbox every Friday!
5. Simplify your life
Do you remember college life? When I was in college, I appreciated a coffee and bagel just as much as I do a steak dinner today. Maybe it’s because I was basically poor back then, but I also lived a much simpler life at that time.
If you strive to live simply and manage your expectations, budgeting will be much easier. You won’t feel pressured to say “yes” every time you’re invited out for drinks, you’ll suddenly find yourself immune to “can’t miss sales,” and the best part: you’ll be happier.
If you’ve already made a habit of living it up every weekend, start by taking baby steps to scale back your lifestyle. You’ll be surprised how quickly you start to find happiness in the little things if you make one small change each week.
6. Don’t lease or carry a large car payment
When it comes to cars, the key is to make sure pride doesn’t influence your decisions. If your current vehicle gets you from point A to B, it’s a keeper, especially if you own it outright.
Research has proven time and time again that leasing a car is almost always the most inefficient way to operate a vehicle. Carrying a small car payment is a much better option if you have no choice, especially if you are able to secure a decent loan rate from a local bank or credit union.
Related: Your Car Lease Is Killing You
7. Brew Your Own Coffee (and Get a Pot With a Timer)
In general, despite what many well-meaning finance experts and newspaper reports love to say, the small things like coffee won’t ruin your budget. So by all means, enjoy the occasional coffee without guilt. But if you’re in the habit of buying a $5 mocha every morning, it’s time to pump the brakes and make your own coffee.
I learned this the hard way when at the end of my first budget month I had spent $80.77 on coffee on my way to work. I had a decent Mr. Coffee Coffeemaker, but it didn’t have a timer feature. If I happened to be running late to work in the morning, I resorted to a quick Starbucks stop, which cost me significant money without contributing to my happiness or nutrition.
Ouch. I’ve since learned my lesson and prep my coffee maker most nights before going to bed.
8. Stay in
I get it: many people, especially singles, will feel the temptation to go out night after night. But this habit will kill your budget.
Instead, invite friends or your significant other back to your place, where food and drinks are cheap and Netflix is nearly free. If you think about it, hanging out with friends is fun because of the company you keep, not where you hangout.
9. Take Advantage of Groupon and Restaurant.com
That said, there are definitely times that staying in won’t be an option: think first dates, large group hangouts, and meeting up with new friends that you’re still getting to know.
I’m not even sure if Groupon and Restaurant.com existed when I made my first budget, but taking advantage of them today really helps me and my wife save money on those inevitable restaurant trips with friends.
With either platform, you can purchase certificates for what is usually a fraction of the value, which allows you to realize significant savings and still enjoy a night out. The most common Restaurant.com offer is $10 for a $25 gift certificate.
10. Build an emergency fund as quickly as possible
When your budget cannot handle unexpected expenses, a strong emergency fund will ensure you don’t have to swipe your credit card. Whenever possible, include contributions to your emergency fund in your budget.
They will add up every month more quickly than you think!
Related: 5 Tips to Save $1,000 Fast
11. Give Money
I have always given 10% to charity and missions organizations, but I know this isn’t for everyone. Truth be told, how much you give isn’t important as long as you start somewhere.
If you’re not a natural giver, start small. Even $10 per month will benefit worthwhile organizations, and the act of giving will be freeing. You will learn to value the money you have and appreciate the little things.
12. Get an Accountability Partner
Finding a friend to help you with budgeting can be eye-opening. He or she may find solutions or wasted money that you missed. And sharing with another person can help you stick to your budget.
A little shame is a powerful thing.
13. Budget In The Fun Stuff
If you only budget for required expenses, you will quickly grow to hate your budget. Plan for fun expenses when budgeting to avoid budget burnout and create a budget that you can live with each month.
Early in our marriage, my wife and I avoided a lot of money fights by allowing each other to have a set amount of “blow money,” or spending cash, every month. Neither of us had a say in how the other person spent that money, which was really freeing.
14. Budget Based on Your Values
Let’s be real for a moment: Your budget should align with what matters most to you! In other words, your budget should be a reflection of your priorities.
Someone who barely knows you should be able to look at your budget and determine what is important to you. If they can’t do this, your budget needs work.
Related: Building a Values-Based Budget
15. Have No Shame in Your Budget
I’m giving you permission: It is OK to explain to people that you are on a budget. In fact, if you keep it a secret, it will be more difficult to stick to your budget.
Be honest with friends about how you’re using a budget to get control of your life. It will be less awkward if you explain before you are invited out for drinks and dinner every weekend. And it will make it that much easier to say no.
It won’t always be simple, but budgeting will keep you on track to take back your life and your money. At first, budgeting may feel restrictive, but remember – you are in charge.
Your budget is only a road map for your money, and you are the one who charts the course. Use these 15 budgeting hacks to improve your own budget today!
Readers, what budgeting tips help you stay on track?
Brian saysMarch 15, 2017 at 10:21 AM
Often people think of a budget as a negative, something that will restrict them, but it’s all about having a plan for your money to maximize it use. Communication with spouse and kids is key to budgeting as well. Great tips!
Hero saysMarch 18, 2017 at 11:29 AM
Thanks, Brian. We might even say that a budget provides some “debt discipline” – ha! 🙂
Ryan - JustAnotherDollar saysMarch 15, 2017 at 11:51 AM
One major annoyance I have come across lately relates to explaining to people that we’re on a budget. Many people I have had this conversation with respond with some sort of pity as if we must be in dire financial straits. The assumption is that we need to watch our spending because we don’t have enough money, and the reality is nearly the opposite. We have a great income and live on a budget to make sure we are using our income to its maximum potential toward achieving our goals.
My budget tip is to not let outsiders have influence on your budgeting & behavior. Hike your own hike – Live your own life.
Hero saysMarch 18, 2017 at 11:28 AM
That’s a great point, Ryan. The word “budget” has so many negative connotations and implications attached, but those of us who use one faithfully know the truth.
And your tip is crucial for anyone forming a budget. At the end of the day, it is a plan to get you from point A to B, and if you form your plan based upon others’ thoughts and ideas, you’ll end up at the wrong destination.
Mrs. Picky Pincher saysMarch 15, 2017 at 3:23 PM
I like to refer to “staying in” as “partying in.” 🙂 You can have a damn good time at home on a budget. Have friends bring a few beers, grill some hamburgers, and enjoy free music on Pandora or Spotify. Boom, magic. We also saved money by making our own household items like all-purpose cleaner, candles, air fresheners, laundry soap, and more.
Hero saysMarch 18, 2017 at 11:25 AM
“Partying in” is also my go to social event of choice. 🙂
Cara saysFebruary 17, 2018 at 9:51 PM
Please tell me about Student Loan Forgiveness Plans and how they work. I owe $15K.
Hero saysFebruary 18, 2018 at 7:40 AM
Hey Cara! Great question. Student loan forgiveness can be a bit tricky and confusing, but here is a good read on the topic that should answer your questions:
If you don’t qualify for forgiveness, the good news is that I think you could knock out $15k, which is admittedly a big number, in 1-2 years with the right budgeting and side hustles. I also recommend connecting with Purefy to gather your options on whether refinancing might make sense for you.[eafl id="2644" name="Purefy" text="connecting with Purefy"]