Having a budget is crucial if you wish to save money. To help you create a better budget, this article is a compilation of the best comments & advice people have sent us on this topic. To put this together I spent many hours outreaching to personal finance experts and put this query out on some journalism sites I belong to:
What’s your #1 tip for writing a good personal budget? Great if you can share something that many people may not necessarily think about, or share something that’s worked for you personally.
Of the dozens and dozens of comments that came in, I’m confident there are at least one or two things here that can benefit you greatly. I have only published comments that I have judged to have real value and which many people may not be aware of. Here’s a summary of what people have sent so far, along with links to the full comment:
- A change of mindset (e.g. avoiding the word ‘budget’ and calling it a ‘Prosperity Structure’ instead, and feeling joy and gratitude for everything included in it) can help you enormously (link)
- Turn it into a winnable game, just like a video game (link, link)
- Print out your last 3 to 6 months of bank statements and use different highlighters to identify vital, important or miscellaneous spending. This will give you a great visual (link)
- Pay yourself first (link)
- Remember that your spending will vary month-to-month (link). Think about all the once-a-year expenses you may have such as vehicle registration and Christmas gifts, for example, and make sure you account for them (link). Therefore, on surplus months, see if you can pay off the expenses you’ll have later in the year (link)
- Start fresh every month (link)
- Budget by payday instead of by month (link)
- Don’t just think about expenses — consider income as well, and how you can potentially increase it (link)
- Consider making your budget public, or if that’s uncomfortable to you, get an accountability partner. There’s plenty of evidence showing that having an accountability partner increases chances of success (link). Your accountability partner can be your partner (link)
- Excel is a good bet for making your budget, especially because there’s plenty of good free budget templates (link)
- Before writing your budget in Excel, writing it on a pen and paper can help you organize your thoughts much better (link) (EDITORS NOTE: There have been a few studies and surveys showing there are benefits to writing on paper, as opposed to typing)
- Beyond just creating a monthly budget, it’s worth also doing a full personal financial check (add up all your assets vs all your debts) to find your current net worth to have a full picture of your financial state (link). By knowing everything in detail including all the debts you have, you’ll be able to find the best way to tackle it (paying off high-interest debt first, for example) (link)
- Consider using an app to track your spending (link)
- Have a “fun money” category where you allocate a small amount of cash to do whatever you want with (link)
- Some recommend tracking absolutely everything (link), while others say to “only include as much detail as you know you’ll be able to manage” (link)
My number one tip for creating a good personal budget is only include as much detail as you know you'll be able to manage.
Plenty of people out there say that the only way to do a budget that works is to plan for every single expense you could possibly incur - which then means you also have to track every purchase at the same level.
However, for many of us, this just isn't going to happen. You may not have the time or even the inclination to keep track of things at that level, meaning that as soon as you drop the ball slightly, you're going to feel like you've failed at your budget and simply give up.
However, there are plenty of budgeting methods out there to suit every personality type - and the trick is to find the one that suits you.
For example, if you're very detail-oriented, then you should absolutely feel free to track where every dollar is coming in and going out.
But if you know that simply won't work for you, something like the envelope method may be more effective. How it works is that you assign a set amount of money each month to different spending categories, each of which are represented by different envelopes. These envelopes, in turn, will each start off the month by containing your spending limit in cash.
You can then only make purchases using the money from the relevant envelope and when the envelope is empty, that's it.
This means that it's a much better budgeting method for someone who wants to control their overall spending, but not down to every last cent. And if that's the method that will make sure you actually stick to your budget, then it's the right one for you.
--Anna Barker, LogicalDollar
When creating a personal budget, the most important factor is having a positive mindset. For starters, I never call it a 'budget'. The word budget has too many negative associations and will ultimately leave you feeling restricted or lacking. Instead I have my clients create a 'Prosperity Structure'. By naming it this way, it leaves you with the sense of creating something bigger rather than being restricted by something i.e. a budget.
As you create your Prosperity Structure it is then important to maintain a powerful and inspiring mindset around each and every item you include in it. You should be able to feel the joy and gratitude for every single thing that is included in it. If not, you are simply creating a structure for the things that burden you. When you complete it, you should have a sense of power, joy and freedom in that you have created a structure for your own personal prosperity.
--Pericles Rellas, Abundance & Prosperity
My #1 tip for writing a good personal budget is to turn it into a winnable game with a scorecard. Everyone gets a little competitive and plays harder when keeping score. This works great for family budgets or with accountability friends. Just write out your budget categories (food, clothing, travel, etc) and how much you have budgeted, then track how much you can stay below that amount. The greater the savings, the higher the score! Keep your card visible and share with friends and family to stay on track and motivated to kick butt and save money.
--Dawn Holley, Stepping Stones To FI
The first thing I teach people to do, when they are trying to create their first budget, is to print out their last three to six months of bank statements.
Use three different highlighters to identify Vital, Important, or Pause or miscellaneous spending (VIP).
Most women are shocked when they realize how much miscellaneous spending they are doing each month. It's a great visual to see the whole statement covered in pink highlighter (or whatever color you choose). This usually includes things like fast food, clothing, coffee, and those oh so fun Target trips.
I then instruct them to try to Pause that miscellaneous spending for one month in order to prove to themselves that they can save money! This also helps to build up a buffer in their bank account when they are just beginning a budgeting journey.
--Shannon Cairns, The Frugal Foot Doc
My number one tip for writing a good personal budget is to write everything down carefully and not to forget about expenses that come up once a year (ie. vehicle registration etc.)
Further, when writing a budget, individuals should always leave some extra room for savings. Individuals should make a list each month that distinguishes between their needs and wants. Generally 30% of their income should go to this Category. Wants may include travel, monthly subscriptions or meals out.
Further, 20 percent should go to savings if possible. Individuals who have debt should also distribute this money to paying down their debts. Individuals can start an emergency fund with this money, open a retirement account or pay off their debt if they have any.
--Karra Kingston, Karra L. Kingston Esq.
My biggest tip for writing a good personal budget is to pay yourself first. What many of us do is pay all of our bills then spend the rest of our money and then are stuck on why it is so hard to save money. When you pay yourself first you think of saving money as a non-negotiable like a bill, and move money straight over to savings before you are tempted to spend it.
--Kelan Kline, The Savvy Couple
Buy Your Christmas Presents in July. Despite your best efforts, it's really difficult to spend exactly what you've budgeted for the month. Some months you'll spend too much, some months you'll spend less than you thought. In those wonderful months of surplus, look down the road and see what added expenses you'll have later in the year. You never know how much you'll have later on down the road, and setting aside a reserve---or even better, spending it on things you'll definitely need later---is a great way to insure yourself.
--Matthew Burke, The Complete Guide to Archery
My top tip when it comes to creating a budget is to start fresh every month. Make sure that you begin your monthly budget at zero to avoid touching the money you were able to save last month.
Unfortunately, it is quite easy to overspend when we see that we have more money stashed away somewhere. Starting at zero will show you only the money you are free to spend for the entire month.
I also tend to avoid credit cards as they allow me to spend more than what I have at the moment. If you just HAVE to use a credit card, it is much better to make note of it for your next budgeting session. It is important to pay off your debts as soon as possible.
--Allan Borch, Dotcom Dollar
I've used the same Excel budget for the past six years, and what's really made it work is budgeting by payday instead of by month.
Many Americans are paid on a bi-weekly basis, or every other week, making it difficult to plan how to use their paycheck most effectively when following a monthly budget cycle. When you budget by payday, you know exactly how to allocate your cash for each pay period, and it takes the guesswork out of those two months per year when you receive 3 paychecks instead of 2.
--Shelley Stevens, Beyond Pennies
My number one tip is to give yourself grace, you won't get it perfect the first time! A budget needs to be a somewhat fluid thing, a guide. My second tip is to really think about everything you spend money on in a year, not just a given month. I think many people have their monthly numbers pretty well ingrained since they have to pay those bills constantly. The expenses that people generally forget about are the things that everybody does: gifts, cards, hosting parties, work on your vehicle, annual insurance policies, camps or sports costs for kids. Not only do these categories tend to be a surprise in a budget, they can also easily cause people to slip into consumer debt if not planned for. Let's take gifts, for example: I recommend that my clients come up with a list of all of the holidays that they like to buy gifts for, and who would get a gift for that holiday, then set a budget per person. We then add that all up, divide by 12, and set up a sinking fund so that there is always a Gift Budget available. Say goodbye to scary credit card bills come February this Holiday season! For work on your cars, take a look at prior year costs and estimate from there. Plan for a major service, oil changes, tire changeover, inspection, state registration, etc. Again, divide by 12 months, set up a sinking fund, and keep that savings account for when those costs inevitably arise!
--Heather Albrecht, Balance Financial Coaching
Most people only think about spending and saving when they think about budgets. They forget to think about income entirely! When reviewing your household budget you should also review your household’s income and make a plan to increase that income. That might involve picking up a new skill or certification or simply planning to really over perform at work in order to ask for a promotion or raise. It might involve updating your resume and applying for a new job with a better salary or more generous benefits. It might mean looking for a part-time job or gig work to pad your monthly income a little. The important thing is to remember that you have the power to change your income, not just your spending and saving. If you're not thinking of ways to increase your income when reviewing your budget you’re ignoring half of the equation.
--Ian Atkins, Choosing Therapy
I've created many many budgets for myself. I never created one that I could successfully stick with, UNTLI I started producing monthly expense and income reports for the world to see.
Of course, this is an unconventional approach and hard to implement for the majority of people. So my advice would be to creating a budget: have an accountability partner.
The American Society of Training and Development (ASTD) published a study (https://www.afcpe.org/news-and-publications/the-standard/2018-3/the-power-of-accountability) that found you have a 65% chance of reaching a goal if you have an accountability partner. Versus 10% chance of success when you don't have a partner.
Many of us don't like to budget or monitor our money so close. An accountability partner may just be what you need!
--Marjolein, Radical FIRE
My #1 tip for writing a good personal budget is simply by using Excel. Whether you want to download a template already made (search for free budget Excel templates) or create your own, a budget doesn't have to be complicated. Track your spending for a full month and then convert what you spend into an Excel sheet. Be sure to categorize it! Tweak it to fit your incoming money and hopefully you can meet any financial goals you may have!
--Tom Nathaniel, LushDollar
Whenever I create a budget for myself every month, I completely change the entire budget depending on what my priorities are for that month. The biggest mistake I see people making when they create their budget is that they follow the same budget every single month which often means not taking into account a change in circumstances, priorities, or preferences. This leads to giving up on your budgeting goals and trying again later- an endless cycle.
I find that a person's budget is the most personal item they create every month which is why it needs to be changed every month. I take into account any events coming up for that month, a change in my priorities, or a change in my income.
--Freya Kuka, Collecting Cents
My #1 tip for writing a good personal budget is to actually write it out before using any type of budgeting software.
This is a method I use to personally budget my finances and it works because:
- I can organize my thoughts better on paper without the distractions of the internet
- It helps me to do a complete 'brain dump of my personal finances.
- Writing down my budget imprints the goals I've set in my mind and makes it more likely for me to remember and prioritize what I am trying to achieve.
--Lily Evergreen, Mommy On Time
Creating a budget can be very overwhelming, especially if it's your first time. When I first built mine a few years back, I have a good idea of how much I'm making every year. However, I've never really broken down my expenses into categories to see what I can invest and afford regularly.
So basically, I was throwing out money on things that I need and want without first figuring out if whether I can truly afford them. Once I realized this and saw that my checking account is not doing so well after paying my monthly bills, that's when I started to really work on my budget.
So my number one budgeting tip is a three-step process: figure out, know, and determine.
Step 1: Figure out how much you have and how much you owe.
Have a look at all your financial accounts, from savings to investment accounts. Know how much money you have on each of these, as well as their interest rates and expenses you make on each. This is crucial at determining what your current net worth is and how to best utilize your capital over time.
Similarly, you also have to determine your monthly recurring debt. To do this, calculate the overall amount you owe on all your debt accounts, including their minimum monthly payment. These comprise credit card debts, mortgages, car loans, etc. Doing so will present you with the first few items in your budget list and help determine your true net worth.
Step 2: Figure out how much you make.
This is quite easy for those with fixed monthly salaries. But your income may increase or decrease monthly if you're an hourly employee or have your own business, making a little more difficult. Nonetheless, the best thing you can do is to know the monthly average income you make in the last 6 to 12 months.
Step 3: Determine your net worth.
Once you've figured out how much you owe and the money you have at hand, you can now calculate your net worth easily. Simply deduct everything you owe to what you currently have. The remaining is the value of your financial resources.
This was the biggest eye-opener for me when I first created my budget. As it turned out, I have little to nothing left once I've paid up my debts and bills.
I've learned over the years that developing a budget you can manage over the long term is worth all the effort since it is connected to building your wealth. At the same time, it'll help you cut your expenses and get you out of debt as well.
--Kate Diaz, Swanky Den
Personal budgets are like New Year resolutions. It usually doesn't last very long. Therefore, I find it very useful to share my budget plan with my wife who then acts as my accountability buddy. This has helped me to stay on course for my budget ever since I started this on a monthly basis. Having someone you trust to be your accountability will enable you to get timely feedback on your progress and also encourage when the going gets tough.
--Albert Lee, Home Living Lab
The best tip to starting a budget is creating a spending journal. It will be nearly impossible to create a sound and effective budget until we know where our money goes. There are several good smartphone apps available for this, so log every cent spent, noting necessary expenses like rent or mortgage, car payments, bills and groceries, etc. and disposable or unnecessary spending. It will soon be easy to see where we need to make changes to our spending habits.
--Konstantinos Tsilkos, PharMed
Start by making an accounting of all of your debt. Paying off your more expensive debt should be an absolute priority when making a budget. Take note of credit cards with high interest rates, and plan to allocate more money to those for the purpose of eliminating them first. If you have debt with 4% interest, and debt with 24% interest, there is very little question of which debt is more expensive and more harmful to a responsible budget. Pay off the high interest debt, then take the money spent on that debt to pay off the next portion of your total debt. This systematic approach will make spending and saving a much more streamlined process.
--Mark J. Strohl, Protax Consulting
My number one tip for writing a good personal budget is to include a fun money category that is cash-based. This tip is crucial for couples, especially if one is a saver and one is a spender.
The only tracking of the fun money category is the monthly cash withdrawal. Then each person gets their cash to do whatever they want with it. No further accountability, no guilt.
Often people think about deprivation when they hear the word budget. But having cash on hand that you can spend any way you choose can help prevent that feeling of deprivation.
The cash amount should be something that you are comfortable with and should not cause you to go in any kind of debt. If all you can afford in your budget is $20, then spend that $20 on whatever you want without giving it another thought.
Personally, having fun money in my budget has saved my relationship. I was always a saver and my husband was a spender. I would get so mad when he spent more than I thought he should. We had so many disagreements about money.
But when we added fun money as a budget category, slowly the disagreements started happening less and less often. He had his money to spend however he wanted and I had mine. And when I spent mine I never felt guilty that I should have been saving it instead.
Having fun money as a budget category enabled me to stop trying to control everything.
--Maria, Handful of Thoughts
My #1 tip that has worked well for me is to set goals on what you are budgeting for. While creating, and sticking to, a budget is generally important, some people need to add a bit of competition into the mix to actually stick to the plan. I am one of those people.
I grew up playing competitive sports and my biggest motivating factor was always making myself better over competing with the opponent in front of me. Much of what I learned about myself and how I succeed or fail, has been shown to me predominantly through sports and the topic of motivating myself to create and stick to a budget is no same.
So, if you are like me, set goals on why you want to start your budget. Is it to save up for a new car or to travel? Maye it is simply to get out of debt, to which I would say that each form of debt (i.e. credit cards, student loans, car payments, etc.) you have should be its own goal in your budget journey. Each goal you hit is a win! And, for me, wins equal motivation to keep it up and stick to the budget to see how many I can accomplish during the process.
--Brendan Heffernan, Dunk or Three
My top budgeting tip is to make investments instead of purchases. When it comes to expenses, ask yourself, "how long will this purchase last?"
For example, investing in an espresso machine instead of hitting the coffee shop every day can save you hundreds of dollars every year.
All too often, we purchase single-use items that don't last longterm and end up eating away at our monthly budget. Expenses that seem small, like toiletries or grabbing coffee, add up big time when you routinely have to replace them. Instead, invest in reusable or high-quality items that will last longer, like refillable cleaning supplies or reusable produce bags. You'll save money in the long run and minimize waste, too!
Sustainable investments typically have a higher price tag compared to one-time convenience items. However, longterm you'll save money because you eliminate the packaging and convenience fees.
The same goes for clothing and electronics. Investing in locally made or higher-quality items will last longer than fast fashion or imported goods. Down the road, you'll purchase less because your investments are still rocking!
In time, you'll notice you're spending less frequently and keeping your hard-earned money in the bank.
--Christina Lyon, bychristinalyon.com
When you’re building your budget, whether it’s for the week, the month or the year, be sure to keep in mind your travel bucket list. By keeping in mind the things you really want to do, see or accomplish, you’ll be able to incorporate a savings plan for this purpose. Travel, both internationally and stateside, is still possible even on a budget. There are several ways to save, while planning, and after you’ve arrived at your destination. Some things that have really helped me are to ensure I check the location of my hotel, go in the offseason, and search for discounts on the activities I want to do. There are several resources out there for this, all you have to do is look! I’ve never gone over budget on a trip, no matter the length of it. I think this is possible for anyone so long as you plan and prepare for it and follow these tips!
--Sanjana Vig, youbethree.com
Before purchasing anything, simply ask yourself is that which you are considering purchasing or paying for actually a need or a mere want? If it's a need (like maintaining a roof over your head, food for your home, gas for your vehicle or money for transportation to get to work for the week, paying a utility bill that's about to be disconnected or another topic of pertinent necessity), then its acceptable. However, common sense should reveal that spending frivolously (on things like getting a new pair of pricy shoes or an outfit every week, eating out at restaurants-bars more than once a week, purchasing or leasing a fancy vehicle or paying rent for an apartment/townhome that is well above what you can honestly afford, and/or doing other trivial things in an attempt to 'portray a certain image' to other people) would not be in your best interest.
--Santura Pegram, theibbm.org
Ever wonder why so many people are struggling financially? The answer is simple: they aren't managing (budgeting) their money. They get paid on Friday, then immediately begin swiping their card every chance they get. By the time the weekend is over, most people are already broke again. They are never able to get ahead and are always living paycheck to paycheck. It doesn't have to be this way. In fact, budgeting doesn't have to be hard. My wife and I managed to save $17,399 in less than 3 months with our budgeting system. And yes, we still got to enjoy the simple pleasures of life such as a cup of coffee from Starbucks. What is our system? It's very simple actually. It looks like this: Get paid > save money > pay for bills + groceries > spend freely or save the remaining. Notice that we save money first before everything else? If you are saving money last, you'll never get ahead. Let me explain. Saving money first after you get paid forces you to think of saving like a bill. It's required. You have to pay it. If you put off saving until the end, you won't treat it like a requirement and will inevitably skimp on doing it. The rich get richer because they practice self-discipline and save + invest their money, instead of spending all of it. So remember, when you get paid, save first, and then you can freely spend the rest on bills, groceries, and other things. I would also highly recommend that you do not stash your money in a traditional savings account. The problem is that the interest rates on these accounts are so low, that you actually end up losing money over time because of inflation. Instead, store your money in a high-yield savings account, which can earn over 20x more interest than a traditional savings account and is still FDIC insured.
--Joshua Mayo, MayoFinance
The Number One Rule of a personal budget is to spend less than you earn.
Don't fall back on using your credit card unless you absolutely must. If you find it difficult not to use a credit card, leave it at home and only shop with a debit card.
Also, when you spend money, try to figure out what the ROI of that spend will be. Do this for every single purchase you make, even if it's for your lunch! This gets you into the habit of doing it all the time.
And, in case you were wondering — the ROI for spending on your lunch is that you then have enough energy to work a little longer and so make more money! Also, the ROI on going out on a Friday night could be that it reminds you of the joy of being alive, and so motivates you to work more on Monday.
See? It's not so cut and dry. But it's an important habit to develop: Never spend more than you earn, and always work out the ROI on what you're spending on.
If you only spend on things that will earn you more money, you'll immediately have a better personal budget.
--Shoaib Aslam, Pearl Accountants