A budget can be a great tool that can help you enjoy your money, save each month, and reach your financial goals. Regardless of where you are in your budgeting journey—whether you’re brand new to it or are looking for ways to improve—here are some tips to help you budget better.
1. List your fixed and variable expenses
You might be tempted to estimate your monthly expenses. However, it’s important that you list them out—this allows you to figure out exactly what’s going where. That means writing down not just how much you pay in rent, but everything from your phone bill to groceries to how much you pay the life insurance company each month for your term life insurance policy. List everything you regularly pay for and how much it costs. Once you do this, you’ll have a better understanding of how much your necessities cost, and you’ll know what you have to work with for savings and discretionary spending.
2. If you have a partner, budget together
If you’re part of a couple—particularly if you’ve combined your finances—it’s important to be on the same page about spending and saving. Sit down together and make sure you agree on priorities, goals, and where your money should be going. After you set your budget, schedule some time to check in and see how you’re doing—it can even be a fun night in with drinks and snacks—and make it part of your routine.
3. Don’t be afraid to make changes
Budgets aren’t static. You’re meant to make changes as you go and figure out what works by trial and error. For example, if you notice you’re spending more on groceries and less on eating out, it’s okay to adjust your estimates. If you get a raise or decide to take on less overtime, it’s time to update your budget.
And remember, things can change from month to month even if your spending habits don’t. Some months you might have to buy a birthday gift, pay for unexpected medical expenses, make home repairs, or maybe you just want to get tickets to a concert you’ve been waiting for. During other months it might be easier to save.
4. Work toward a goal
Goals can be motivating, especially when you’re trying to save money. Knowing that you’re saving for a new car, to make a down payment on a house, or to go back to school can be just what you need to stay on track each month. If you don’t have financial goals, sit down and figure out what you really want. Think about short-, medium-, and long-term goals. Then, make a plan to hit them.
5. Be flexible
It takes time to get used to budgeting. Your budget probably won’t be exactly right the first month—but you’ll figure it out. Even after that, there might be months when you go over budget. It’s important to remember that no one’s perfect. Stay flexible, be understanding with yourself, and keep working toward your financial goals.