Budgeting Tips

Now that you know what a budget is and how to create one, it’s important to stick to it.
 
To stay on track, keep your budget realistic and revisit it from time to time, making adjustments as needed. If you’re not used to using a budget, it may be challenging at first. But before long, your new habits will feel natural – and you’ll start to see progress.

Track your budget

To begin, it’s important to get a clear picture of where your money is going. Set up a system for tracking your expenses. Choose the method that works best for you, then create a routine for recording every dollar you spend.
 
This might seem time-consuming, especially as you’re getting set up. But once your system is in place, you’ll fall into an easy rhythm. Set aside time every month to check your figures. Once you start tracking your spending, you might be surprised to learn how much (or how little) you spend in certain categories.

Manage your spending

Save money by cutting unnecessary expenses and making deliberate spending choices. Here are a few tips for spending less:

• Make a shopping list. Make a list before going to the grocery store, for example, and stick to it to avoid impulse buying. Also, eat before you go, so your empty stomach won’t influence you to buy items you don’t need.
• Cancel subscriptions you don’t use. Are you paying for a streaming service you never use? Did you sign up for a free trial to download an app onto your phone – then forget about it? Those monthly charges add up quickly. In the US, people spend an average of $219 a month on subscriptions. So review yours and cut any you don’t need.
• Check your phone and WiFi plans once a year. Make sure you’re truly using the data, speed, and features that you’re paying for.
• Go sustainable. Choose energy-efficient appliances and lightbulbs, take shorter showers, and use Swedish dishcloths instead of paper towels. You’ll save money while helping protect the environment.
• Pause before you buy. When you’re tempted to buy an item you don’t need, wait for 24 hours before buying. You might find that the temptation passes.
• Try a no-spend week (or month). Challenge yourself to avoid spending money on extras like dining out, new clothes, and hobby supplies. This experiment helps you recognize how often you spend money on things you don’t need. It might even help train you to make more intentional spending decisions moving forward.
• Repair rather than replace. If a household item breaks or there’s a hole in your sock, try repairing it.
• Keep your car in top shape. Schedule regular oil changes and other maintenance. Taking care of your vehicle now can help prevent more expensive problems later.
• Seek out free or low-cost entertainment. Gather with friends for a picnic in the park, or movie night or game night at home. Most local communities offer free events like book clubs, street fairs, and cultural festivals. Check your local library, nearby universities, and your city’s social media for fun events.

When to review your budget

You should review your budget at least once a year, though most people find it useful to revisit it at least every quarter.
 
There are also 5 other times you should revisit your budget.
 
1. If you’re living paycheck-to-paycheck
 
If there’s nothing left to save at the end of the month – or if your debt has grown due to charging monthly expenses like groceries – that’s a sign you need to revisit your budget. Take a close look at where your money is going and try to cut back on expenses that are wants rather than needs.
 
It’s easy to overspend, for example, on dining out, entertainment, and clothing. It’s all about trade-offs. If you love going out to eat with friends because you enjoy hanging out with them, suggest a less expensive restaurant or host a potluck at your home. If you love buying trendy clothes, consider buying from a second-hand store or website instead of buying new.
 
2. If your income rises or falls
 
Got a raise? Rather than treating yourself to extra shopping trips and fancy dinners, set aside that extra money to pay down debt, build your savings, and work toward your financial goals. This is a great time, for example, to increase your retirement savings.
 
If you lost your job or took a pay cut, take an honest look at your budget and identify ways to trim costs. Also, consider selling items you don’t use anymore or turning a hobby into a side business.
 
3. If your expenses have changed
 
If you’ve given birth to a child, you’ll need to add to your budget expenses like diapers, clothing, medical costs, and childcare.
 
If you purchase a home, your budget should include your mortgage payment, insurance, property taxes, and utilities such as energy and garbage collection. You’ll also want to budget for maintenance and repair costs. Try setting aside between 1% and 4% of your home’s purchase price for maintenance, depending on your home’s age (older homes generally require more repairs). And if you plan to remodel, work those costs into your budget, too.
 
If you switched to a job with a longer commute or paid off a loan, your monthly expenses have also probably changed. Review where your money is going now and adjust your budget accordingly.
 
4. If your goals have changed
 
Have your goals changed for the year or the season of life? Maybe you want to pay off your car this year, begin saving for a child’s education, or plan a dream vacation. Anytime your financial goals change, take an honest look at your budget. Saving an extra $20, $50, or $100 a month will make a difference as you work toward your goals.
 
And when you accomplish a goal like paying off credit card debt – good for you! Now you have a little extra cash on hand each month. Ask yourself how you can use those extra dollars to reach your next goal.
 
5. If you’ve inherited money or received a bonus
 
Large sums of money don’t come along very often. You may wish to evaluate options such as paying down debt, saving, investing, or making a large purchase based on your financial priorities.
 
Receiving an inheritance really empowers you to work toward a goal. You could use your inheritance to pay off debt quickly, make a down payment on a home, or invest in your retirement savings.

Budget Insight

According to WalletHub, 86% of people say the biggest budgeting challenge they face is rising costs.

Questions to ask to stick to your budget

When it’s time to revisit your budget, ask yourself these 5 questions to help determine whether your budget is realistic:

1. Has my income changed?
2. Have any of my expenses gone up or down?
3. Do I have more or less debt?
4. Have my goals changed, and how does this budget help me meet my goals?
5. Is this a budget that I can really stick to?