Let's face it, budgeting is one of those hate or love relationships we have between ourselves and our money. But, without a proper budget, your finances will be mediocre at best, and your wealth will be stagnant.
You've got your budget set up, but now you're looking for ways to improve your budget and implement proven budgeting strategies. Here are 15 budgeting tips and tricks that will accelerate your financial health.
If you haven't yet done so, be sure you make your budget first. You can follow my 5 step process to creating a customized budget here.
1. Set Your Goals FIRST!
If you followed my step by step process to creating a budget, you've got this part done already. However, many budgets out there simply account for money in and money out, without taking into consideration your financial goals. This is CRAZY!
Your budget should be built around your financial goals. Whether you want to save for a vacation, pay off debt, buy a house or save for retirement, you need to build a budget that takes steps in the right direction to achieving these goals.
2. The 50/30/20 Budgeting Plan
A popular plan used for allocating your funds properly is called the “50/30/20 rule.” This means that you allocate 50% of your income towards your needs, 20% of your income towards wants, and 20% of your income towards savings.
Needs include things like food, water, and shelter. Wants include things like clothing or entertainment. Savings means saving for retirement, college, major purchases or purchasing a home.
3. Use A Budgeting App
If you're not already using a budgeting app, you're either going super old fashioned using a traditional checkbook, or you're just using an excel spreadsheet. Both of these are fine, to each is their own.
However, using a trusted budgeting app like Wismo, Trim, or Personal Capital can help you save a lot of time and money. Budgeting apps help track and categorize your spending and view it all in one location.
Some of these apps even automate things like spending habits, areas to save money and automated savings plans.
4. Build an Emergency Fund
Every budget should include the goal of building an emergency fund. If you don't have one already, then it would be wise to make this your priority goal to work towards.
Your emergency fund should have at least $500 – $1,000 to start with and should be added to regularly to build up to a few months of living expenses.
5. Review & Update Your Budget Regularly
A common issue many people unintentionally come across is creating their budget on paper, then just following it in their head. In other words, they create the budget, and just try to remember everything from then on expecting they will get it right.
The problem here is this creates a habit of spending uncontrollably and takes you off track of your real financial goals. Your budget should be reviewed on a regular basis at least monthly, and preferably every week or every other week. These reviews don't have to take any longer than 15 minutes.
6. Budget One Month Ahead
Budgeting one month ahead means using your income this month to pay for the expenses of next month. Why is this helpful? Because it creates a cushion of safety by nature and can help you more accurately account for expenses by adjusting your budget to your income accordingly.
7. Apps That Lower Your Bills for You
You can save a lot of money by lowering your monthly bills like your cable bill, cell phone bill, internet bill, and even security system bills. But, no one likes calling all these companies and arguing with them to give you a better rate!
Thankfully, apps like Truebill, Billshark and Trim all automate this process for you! They analyze your spending, and automatically notify you when they think you could be getting a better rate on your bills. Next, their team of professionals will reach out to your service providers for you and negotiate a lower bill.
8. The Envelope System
If you're familiar with Dave Ramsey, you've probably heard of the envelope system. The envelope system is a budgeting strategy that uses cash and not debit cards. After completing your budget for the week or month, you create a separate envelope for each spending category. When that envelope is empty, then you're done spending in that area of your budget.
Why use the envelope system? Because it helps people avoid overspending their budget limits and eliminates potential “impulse purchases.”
9. Separate Your Bills Checking Account
One of the most frustrating things people come across is overdraft fees from their bank, often costing 10 times more than the purchase that took you negative in the first place!
A trick to eliminate this problem is using a separate checking account designated for your monthly bills. That way, when you make an electronic payment, you can transfer the funds to that bills account and know that no other expenses or daily purchases will alter that balance and the payment will go through.
This also makes it easy for accounting purposes to categorize all your bills.
Take a look at Axos Bank, they are an online only FDIC insured bank and provide checking accounts without any overdraft fees.
10. Give Yourself an Allowance
Spenders will be spenders, and savers will be savers. To eliminate any frustration with your spouse, and to eliminate your habit to overspend whether single or married, using the old-fashioned allowance system works every time.
When doing your budget, determine an affordable amount that you can pay yourself each week or month. This money is to be used however you wish. You can spend it on what you want, or save it for a larger purchase, or even invest it in the stock market if you choose!
11.Pay Yourself First
One of the most important budgeting tips in my opinion is paying yourself first. How is one to ever build wealth if they don't ever keep a portion of the money they make?
Paying yourself first before anything else creates a habit of saving, points your net worth in the right direction (that is, upward), and even gives you satisfaction that your finances are getting stronger.
If your budget is tight, I promise you that you can find an extra $10 per week or even month to add towards savings and to never touch. An extra $10 here and there can go a long way over time, and finding that extra money to save can be as simple as working an extra hour per week, creating extra income through freelancing or even making money online with cashback websites.
12. Follow A Zero-Based Budget
Zero-based budgeting means that you account for every dollar you earn. If you make $5,000 per month, that means that you account for every dollar of your $5,000 until it's zero.
This includes savings, investing, retirement, daily expenses, and everything in between. If there is left over money, then budget that money to the category that helps you progress towards your financial goals the quickest.
13. Take Advantage of Free Cashback Websites
No, this isn't some “make tons of money quick” technique. It is, however, a great way to earn an extra few hundred bucks. Cashback websites like ibotta, Topcashback, and Mr. Rebates let you earn free money for everyday purchases you already make!
14. Set Aside Money for Investing
If you're not investing in the stock market yet, you need to be! Why? Because investing is the single most efficient way to build wealth. Period. This goes hand in hand with paying yourself first, even if it's just a few bucks here and there.
With investing, you should create the habit as early as possible to set aside at least $5 per week and have it invested in the stock market. Popular investing apps like Acorns, M1 Finance and Public let you invest with as little as $5 and have no fees and require little to no investing experience.
Want to learn how to invest? Take a look at my course “You Don't Have To Be An Expert To Invest In Stocks.“
15. Reward Yourself for Achieving Goals!
If your goal is to save $500 for your emergency fund, then reward yourself for your hard work with a night out to dinner, a $25 gift card to your favorite place, or some small monetary gift.
The idea is to create healthy incentives for healthy financial habits and rewarding yourself for achievements is psychologically proven to improve your behavior.