Top 10 Budgeting Tips

This week on the podcast, I am talking about my Top 10 Budgeting Tips!

Whether you are creating a budget for the first time or your budget just needs a revamp (maybe inflation has it all out of whack?); these tips are sure to help get you on track!

My Top 10 Budgeting Tips

Tip #1

Assess your spending in the last few months. Know where your money has been going! Are you spending more than your income and creating debt?

Are you paying for a subscription you never use and need to cancel? Do you think you spend $600 on food but it's really $1,000? Knowing where your money has been going is essential to creating an accurate budget.

Tip #2

To create your budget, you need to assign a purpose for every dollar of your income.

Your income minus your expenses should equal ZERO. If it's negative you are going into debt and if there is money unassigned then it doesn't have a purpose.

If you have a monthly salary, it is straightforward what your after-tax income is to begin your budget. If you have an irregular income such as a commission-based pay plan, you want to "plan for the worst" to cover your essentials and then have a plan for all additional income earned.

If you are paid weekly, you want to create your monthly budget off 4 weeks of income. You will have a few months with an additional week of income and make a plan to put that towards debt paydown, savings, or another purpose.

Tip #3

Prioritize the necessities. Your 4 Walls are the categories of Home, Transportation, Food, and Utilities. These are essential to survival. Note that food is both an essential like groceries and a non-essential like eating out. Once you prioritize the 4 Walls then you want to prioritize debt pay down, savings, etc.

Tip #4

Know if your categories are on track with guidelines. Generally, your total Home expenses should be about 25% of the budget, including insurance, property taxes, HOA, etc.

If it is over 30% then that category is heavy in comparison to income. Transportation should be 10-15% but if you have a car payment that percentage could be higher which means another category needs to be low.

Food is 10-15% (that includes if you are budgeting to eat out a few times) and Utilities are around 5%. Your debt paydown and savings should be about 15% and giving of 10% (if that is a priority to you).

Other minor categories include personal expenses, misc expenses, other insurance (maybe term life insurance), healthcare (co-pays, etc)

One thing to think about is if you have other large expenses like paying for your health insurance, daycare, etc. These items could take up a large percentage of your budget and other categories will need to give.

Tip #5

Be on the same page with your spouse. Do the budget together, review it, and be honest about your spending! Money causes a lot of marital issues. Don't let it!

There may be a lifestyle change getting on a budget so give each other some grace as you walk through this together! If you are single, get a friend to help hold you accountable! Make sure it is a friend that will support your new spending choices.

Tip #6

Review your spending weekly to keep your budget on track. Adjust for any unexpected expenses immediately so your total budget doesn't go over.

Your budget is going to change from month to month. It is not set it and forget it so stay on top of it! Plan for the big expenses at the beginning of the month so you can get them checked off the list!

Tip #7

Food is a common category to overspend so make a meal plan, eat at home, and eliminate food waste. (Be sure to check out last week's podcast and the blog post The Value of Meal Planning as well as my e-book How to Meal Prep)

Meal planning not only saves you money; it also creates less stressful evenings. If you are going to eat out some, be sure to add it to your budget so that you don't ignore that expense.

Tip #8

Plan for quarterly and annual expenses in your monthly budget. Don't let those big expenses creep up on you and put you into credit card debt. If you know of upcoming home repairs, save for them in your monthly budget. And if you get a tax refund, make a plan for that money such as debt paydown or savings; don't go on a shopping spree!

Tip #9

If you have credit card debt, cut it up, prioritize paying off the debt, and only use cash or a debit card during the payoff process. If you are regularly tempted to overspend by using your credit card then put it away!

Tip #10

Create savings goals and a priority list. An Emergency Fund should be at the top of the list. This is enough to cover 3-6 months of expenses. Once you have that, you can focus on saving for a home down payment, retirement, paying for college, etc. Different saving categories need different savings tools such as a savings account for the emergency fund, maybe an IRA for retirement, and a 529 plan for college. Create goals for the different categories! Be sure to track your progress and make sure you are achieving them!

All information is considered educational and is not considered financial advice.