What are your financial goals? Maybe you dream about cruising off the lot in a new vehicle, or living completely free of credit card debt.
Whatever you want for your future, following careful and conscious budgeting tips can help you get there. Here are a few of our favorites to get started:
- Know your why
Know why you decided to start a budget, and keep yourself accountable by writing your reasons in a notes app or on a slip of paper to keep in your wallet. Then, when you’re tempted to blow your budget on a funky hat, you will see your reasons and remember why your goals are important. - Be honest
How much do you really spend each month? What about those days when you didn’t have time to pack a lunch, or the impulse decisions to pick up coffee on your way to work? Unexpected purchases can add up and wreck your budget. Track your spending habits carefully and honestly to create a budget that works for your lifestyle and your goals. - Pay yourself first
Before you put money toward necessities, move money into a savings account each time you get paid. Your bank may be able to automate the process. Paying yourself first will help you see saving as a priority and ensure you’re working toward your goal. Some experts recommend saving 20% of your take-home pay. - Be prepared
In addition to savings, put money into an emergency fund. Try to keep six to eight months of living expenses on hand. This fund can help you afford urgent, unavoidable expenses, such as medical issues or job loss, without going into debt. - Learn when to say no
Have you ever jetted off on vacation without glancing at your bank account? Or decided to get pizzaandcheesy breadsticksandlava cake? Instant gratification can feel awesome — until it starts to hurt. Learn to say “no” or “not right now.” Putting off big expenses or splurges until you’ve had time to consider and save money will help you make smarter, more satisfying decisions. - And when to say yes
As you build your budget, make room for things you enjoy, like an occasional meal out or that funky hat. You’re far more likely to stick to a budget that fits your lifestyle and doesn’t make you feel deprived. - Make it a team effort
Budgeting is easier when everyone is on the same page. Sit down with your partner to determine your goals and figure out your budgeting plans as a family. You can even download a finance management app that syncs across devices to keep everyone accountable and on the same page. - Keep at it
Life happens, and your personal finances can be impacted. You will probably mess up on your budget here and there, but don’t quit or be too hard on yourself. Be prepared for unexpected expenses, stay consistent and keep tweaking your budget to find what works best for you. You’ll get there!
Ready to build your budget and make your goals happen? KEYS® Online has free financial courses to help you get started.
By Brooke Howell, GM Financial
Brooke Howell is a storyteller who loves digging up ways to improve money management and help others make smart financial decisions. She has three American Staffordshire terriers, one curmudgeonly Chihuahua and doesn’t do anything by halves (except marathons).
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FAQs
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
How to start a budget list the 8 ways? ›
How to Create a Budget in 8 Steps
- Determine Your Income. ...
- Assess Your Expenses. ...
- Track and Adjust Your Spending. ...
- Subtract Your Expenses from Your Income. ...
- Set Your Financial Goals. ...
- Determine Your Budget Strategy. ...
- Build Your Budget. ...
- Review Your Budget Regularly.
Having a budget without understanding your financial goals will not ultimately benefit your financial health. As Dave Ramsey says, “A budget is telling your money where to go instead of wondering where it went.”
How to budget $4000 a month? ›
How To Budget Using the 50/30/20 Rule
- 50% for mandatory expenses = $2,000 (0.50 X 4,000 = $2,000)
- 30% for wants and discretionary spending = $1,200 (0.30 X 4,000 = $1,200)
- 20% for savings and debt repayment = $800 (0.20 X 4,000 = $800)
Consider an individual who takes home $5,000 a month. Applying the 50/30/20 rule would give them a monthly budget of: 50% for mandatory expenses = $2,500. 20% to savings and debt repayment = $1,000.
What are the 8 principles of budgeting? ›
The ten principles are:
Ensure that budget documents and data are open, transparent and accessible. Provide for an inclusive, participative and realistic debate on budgetary choices. Present a comprehensive, accurate and reliable account of the public finances. Actively plan, manage and monitor budget execution.
What is the 70 10 10 10 rule? ›
This principle says for each dollar you earn or are given, you should save 10%, share 10%, invest 10% and spend 70%. A key part of this formula is “paying yourself first” which means the first 30% of your earnings are paid to you, for your benefit … for your retirement, for emergencies, and for sharing with others.
What is 8s budgeting? ›
Budgeting in business is a process of looking at a business' estimated incomes (the money that comes into the business from selling products and services) and expenditures (the money that goes out form paying expenses and bills) over a specific period in the future.
What are the 3 R's of a good budget? ›
Refuse, Reduce and Reuse.
What are the 5 basics to any budget? ›
What Are the 5 Basic Elements of a Budget?
- Income. The first place that you should start when thinking about your budget is your income. ...
- Fixed Expenses. ...
- Debt. ...
- Flexible and Unplanned Expenses. ...
- Savings.
The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
What is the Ramsey budgeting method? ›
Dave Ramsey's post
- Write down your total income for the upcoming. month. — This is your take-home (after tax) pay for both you. ...
- List ALL of your expenses. — This includes regular expenses (rent or mortgage, electricity, etc.) ...
- Subtract your expenses from your income. This. ...
- Track your spending throughout the month.
Personal finance expert Dave Ramsey says if you're going through a tough financial period, you should budget for the “Four Walls” first above anything else. In a series of tweets, Ramsey suggested budgeting for food, utilities, shelter and transportation — in that specific order.
What is one negative thing about the 50 30 20 rule of budgeting? ›
Hopefully, you wouldn't do this, but the way the 50/30/20 budget is set up, it can cause high-income individuals to spend a lot of money on things that they don't need and not save enough for important financial goals.
What is the 40 40 20 budget rule? ›
The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.
What is the 50 30 20 rule for 401k? ›
Key Takeaways
The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
When might the 50 30 20 rule not work? ›
Some Experts Say the 50/30/20 Is Not a Good Rule at All. “This budget is restrictive and does not take into consideration your values, lifestyle and money goals. For example, 50% for needs is not enough for those in high-cost-of-living areas.
