Budgeting is an excellent way to stay on top of your finances and is a practice at least one out of three U.S. households utilize to remain financially stable. Although it may feel like a big “to-do,” the helpful tips below will help you become a budgeting pro in no time.

 

1. Write Down Where Your Money Will Go

 

An excellent first step to creating a budget and ensuring you’re not frivolously spending your hard-earned cash is to write down all of your expected monthly expenses. Plan down to the last dollar so that no money is leftover. Having nothing leftover doesn’t mean you have no money. It just means you’ve accounted for 100% of your monthly income. Budget categories vary from person to person, but some common ones include:

 

●      Housing (rent or mortgage)

●      Food costs

●      Monthly debts

●      Gas and car payments

●      Healthcare costs

●      Insurance

●      House utility bills

●      Emergency funds

●      Entertainment, i.e. dining out, going to the movies

●      Savings account

●      Children

●      Clothing

 

The easiest way to start is to figure out exactly how much your income is each month and then separate the amount into each of your chosen categories. Start with the most important expenses that need to be paid, and then put the extra money into the optional categories like clothing or entertainment.

 

2. Include Your Debts in Your Budget

The average U.S. household has $50,000 to $100,000 in student loan debt, $30,000 in car payments, and $16,000 in credit card debt. Make paying off your debts a high priority, especially if you’re subject to high-interest rates. If you’re in a lot of debt, first try tackling the ones with the highest interest rates. Do what you can to pay these off as soon as possible and avoid superfluous expenses like dining out until these debts are entirely or mostly paid.

 

Make sure to include your debts in your written budget so you are never caught off guard. When you’re forced to account for them, you are more likely to realize how much you pay in fees and interests and be motivated to pay them off as soon as possible to avoid paying more to lenders than you need to. Paying off debt is always beneficial and will help to improve your financial situation in the long run.

 

3. Be Smart About Grocery Shopping

Groceries are a significant monthly expense, especially if you have a family, but there are ways to save on food costs. One recommendation is to schedule your grocery trips so you’re going once every other week. You’re likely to spend less just by minimizing your trips to the store.  Plan ahead of time and bring your shopping list. This way, you’ll prioritize the things you need rather than the extra things you want that have the potential to eat away at your budget. Also, you can save hundreds of dollars by clipping coupons from the newspaper and looking out for sales prices.

 

4. Review & Adjust Your Budget Monthly

Your finances and budget priorities are bound to change from month to month, and thus it’s important to create a new budget for every month. Perhaps Christmas is coming and you need to budget for presents, or you need to account for school expenses at the beginning of the school year. Don’t get lazy and just copy and paste from the last month. These costs can quickly consume your budget if you don’t account for them. Start fresh each month with a new budget sheet to adjust for any income changes or shifting budget priorities.

 

5. Write Down Your Financial Goals

It’s important to write down the financial goals you’d like to achieve in the near and distant future. This way, you’re aware of your progress towards achieving them. Maybe you want to pay off your credit card debt in full or pay off 50% of your student loan in the next three years. Whatever your goal, writing it down either on your budget worksheet or on a piece of paper that lives in your wallet will make it be top of mind for you at all times. Make sure everyone in your household is on board with your goals. You’ll likely achieve your goals even quicker by openly discussing your plans and working with your partner or family.

 

6. Don’t Be Surprised by Sudden Needed Repairs

Even if your home is in pretty good shape, you should always have extra money saved in the case a repair is needed. It’s recommended that homeowners should save about 1% of the total cost of their home every year for repairs. Even if you have a year where there aren’t any expenses, you never know what the next year will bring. By incorporating repairs into your monthly budget, you'll be prepared when a significant repair expense comes around, like needing a new roof or installing central A/C.

 

7. If Credit Cards are Too Tempting, Just Use Cash

 

If you’ve learned you’re not able to responsibly manage your credit card, which is common for many people, then just use cash. This approach is called the “envelope system,” where each month you’ll pull your total budget out of your bank account in cash, and separate the total sum into different envelopes that correlate to your budget categories. This is a great way to visualize how much money you have for everything so you aren’t tempted to spend money you don’t have.

 

8. Try to Buy Used Options When Possible

Buying brand-new household items like furniture and decor can add up quickly. Help yourself stay on budget by buying second-hand when the option is available. This way you don’t have to sacrifice other parts of your budget for costly new items. Try going to thrift stores or looking at “open box” items online. It may take some digging but you’ll be surprised at the second-hand options out there. Many communities or groups online link you to your neighbors who might post things they want to sell or give away.

 

9. Make It a Habit to Compare Prices for Your Monthly Expenses

The prices for monthly expenses like car insurance, cable, phone bills, alarm services, even gardening, can all fluctuate dramatically in cost over time. You can save a lot of money by regularly doing research and comparing prices for each of these things you pay for each month. Utilize online comparison tools or just call up the companies you have relationships with to ask about any current discounts. If they don’t have any discounted services, consider bringing your business elsewhere that costs less each month. One example of this is you can switch up your TV provider and use a low-cost TV subscription instead of paying a hefty monthly bill for satellite television.

 

10. Say Goodbye to Your Credit Crds

As you set out to pay off your credit card debt, one route you can take is to simply cut them up and throw them away so you’re not tempted to use them any longer. If you still need to improve your credit score and want to keep your cards, continue to use them regularly but make sure to pay your monthly balance in full every single month. If this isn’t achievable for you and you still find yourself using your credit card for unnecessary purchases, simply throw your credit cards out and stop using them entirely.

 

11. When Necessary, Cut Your Budget

You may need to tweak your budget and tighten your belt if an unexpected cost comes or you want to make paying off your debt a priority. Cut your budget and make it tight for a while, sacrificing extra costs like cable or entertainment. It might prove to be harder than anticipated but making these temporary sacrifices might be worth it in the end if it means you’ll achieve a larger financial goal quicker.

 

How to Budget Successfully

Budgeting and household finances isn’t something people love to talk about, but implementing these smart practices help to save money and have future financial freedom. There are growing pains when starting to budget, but don’t give up. You’ll be an expert in a few months and on your way to paying off debts and saving money for large financial goals like buying a home.