If you want to pay off debt, save for retirement and become financially independent one day, budgeting is the one and only process that needs your constant attention and effort. After years of writing about financial literacy, we have created a list of the ultimate budgeting tips to help you:
If you don’t want to keep a huge budget, it’s OK
On many personal finance blogs we are being taught about the importance of keeping track of each and every penny spent, keeping extensive budgets, planning every spending category etc.
I have personally found out that this budgeting process is so time consuming and boring, that I can easily lose 4-5 hours a month at least to keep up with all our accounts (personal and business). I’d rather use this time to work on my medical SEO company or just write a new blog post.
This is why I find the 50-20-30 budgeting rule to be a lifesaver, because you just create 3 huge categories for your income and then use the money based on this. Of course, the percentage can vary, the idea is to have few main categories and just ‘feed’ the money into them, without trying to account for each penny.
Anyway, before you can skip this step, you should try to keep track of your expenses for 30 days every once in a while. This allows you to see easily where you can improve financially and then use the new habits to achieve new financial goals.
Use cash, when possible
I hate it that I need to keep a credit card, to improve credit score, that I need a separate checking account for my business, a paypal account (now I have a Stripe account as well) etc.
It drives me bonkers to have to wade through all this data and split my money in so many ways.
And, when we also think about overspending (groceries, anyone?) I start liking the idea of using the envelope budgeting system more than ever.
If you have an envelope for food related items, for instance, just take out what’s available for you that month. Say you set a $600 groceries / eating out budget for the coming month, this means $150/week or 20 something bucks/day.
It’s easier to plan your purchases or going out, when you have only this money, compared to swiping your credit card and then having a heart attack when you need to pay for it.
Don’t waste money on budgeting apps
There are so many budgeting apps available, it’s crazy. I’s stay away from those you need to pay for on a monthly basis, we’re already paying too many bank fees and transaction fees, why pay even few bucks to budget?
I like the idea of paying once for an app (as I did with the classic YNAB app or AceMoney), but to pay every month, it’s not acceptable for me. If all fails, use an Excel spreadsheet or write the transactions the old style, on a paper notebook. Whatever you use, be consistent with it and budget every month.
Be realistic in your budgeting
I know you’d like to spend 100 bucks on food, if possible and save 90% of your paycheck. Unless you make a lot of money or have someone pay for your food (I don’t see how you can realistically eat for 3 bucks/day and eat healthily), you’ll need to create a more realistic budget.
Those 30 days of keeping track of each expense are useful because after a month of tracking your money, you can understand your spending better and see how to create your budgeting categories better.
Have a goal in mind
It’s easier to properly budget, when you want to become debt free or save enough money for a new business venture you have in mind. As soon as a month has ended and you haven’t spent all the money budgeted, just put it towards your goal (maybe accelerate your mortgage payments, save for a trip, buy a much needed car or repair the leaking roof).
Have a contingency category
Most of us have some main budgeting categories (rent / mortgage, emergency fund, car payments, credit cards, tithing, groceries, utilities, transportation etc.).
Some of the die-hard budgeters even go further, creating categories for so many separate things, it’s a pain to follow that budget.
If you feel like there’s yet another spend that you didn’t account for, just have a ‘contingency’ or ‘miscellaneous’ category to ease up your expense tracking.
Make sure that you don’t cheat on your budgeting, categorizing the expenses that got out of control as miscellaneous. Always stay true to your budget.
The biggest of all budgeting tips – never lie in your budgets
I know you feel a little ashamed every month when you budgeted $3,000 to spend, for instance, and you got over the budget with few hundred bucks, maybe even more.
Instead of trying to hide these in miscellaneous categories or plain lie, understand these spending habits and see if there’s anything you can do about them. Maybe you could spend less money on a certain category or try to make money from a side hustle to re-balance your budget.
Stop using credit cards, if you cannot be responsible with them
Almost all the financial headaches Americans have today stem from improper credit card use.
If you just cannot curb your spending, cut them all and go back to using cash as much as possible, or debit cards on the payments that don’t accept cash.
Right now, our biggest accomplishment since moving to the US is remaining debt free.
We are struggling to make ends meet every month, but we have no debt whatsoever and plan on remaining so at least for few years, when we’ll most likely contemplate a mortgage, as I personally prefer paying for my own house than paying rent.
Create a schedule
Do you have some ‘lazy’ hours during the evening? Maybe, at the office, as you sip your coffee, instead of hitting Facebook, you can work on your budget. If you incorporate budgeting into your regular routines, chances are you’ll be able to find the time easier and not slack on it.
These are the main budgeting tips that will allow you to achieve your financial goals faster and struggle less managing your money.
