You may already know that financial health depends on budgeting and saving money. But with debt to pay down, everyday expenses, and big financial goals—you might be looking for a budgeting method or spending plan to help you manage money wisely.
Money management usually includes budgeting—the tracking and balancing of the money you earn and spend. We’ve got some tips and tricks to help you learn how to budget your finances.
A budget details your monthly income and expenses to enable you to plan for your spending, savings, and debt repayment. A budget might be adjusted in the short term for a specific goal, such as a big purchase or holiday. Or it might be designed to help you meet long-term goals such as paying down debt, saving for a new home or retirement, or building an emergency fund.
Managing your personal finances with a budget may help keep you on the right path as you work toward your goals. Here are nine tips tips to help you achieve successful budgeting.
Make a list of all the money you bring in each month. Be sure to include your regular paycheck and any income from savings, government programs, or other sources. You’ll want to use your net pay, which is the amount you receive after any taxes and benefits payments have been deducted. If you have a side hustle, such as babysitting or dog walking, be sure to add that to the list.
Next, figure out where your money goes. Note any regular spending. Take your time to be sure you include everything: rent or mortgage, utilities, phone, internet, streaming services, groceries, takeout, childcare, gifts, medical expenses, insurance, etc.
Now it’s time to separate your nice-to-haves from your need-to-haves. Before trimming your spending, it is important to identify those things you really need. That might include housing, groceries, utilities, transportation, clothing, medical expenses, auto insurance, and homeowners or rental insurance.
Once you’ve noted what your essentials are, you can start to consider what to do with your discretionary income, which is what is left after taxes and cost-of-living expenses. Discretionary spending can include vacations, investments, and other non-essentials. This is also the time to think about saving for the future like college tuition, retirement, or a down payment on a home.
Grab a pen and some paper, or your laptop, and think about why you want to manage your money better. Take notes as you lay out your goals. You may want to separate your list into long-term financial goals and short-term goals.
Examples of financial goals might be a specific home improvement project you want to start, or debt you want to repay. You might need to build an emergency fund in case of unexpected expenses. Or you could be saving for a big trip or other life event.
If you are saving for retirement, note how much you put into your 401(k) or other retirement funds each month. Consult with a professional to determine whether it meets your long-term goal.
Be sure to include any other expenses that you might be able to anticipate, such as vacation or medical costs.
With the information you have collected about your income and expenses, you can begin to create your budget. Exploring different budgeting techniques such as the 50/30/20 method, zero-based budgeting, or proportional budgeting is a great way to start.
The 50/30/20 is when 50% of your take home pay goes to basic living, expenses like rent or mortgage, groceries, and utilities. Then 30% goes to extras or “wants” like dining out, entertainment, and vacations. The remaining 20% goes to paying off debt, savings, retirement, and/or charitable giving.
Whatever you do, try to set a realistic plan that you can maintain. Your success in sticking to a budget might provide additional motivation to improve your finances, as well as help you achieve your long-term goals.
As part of your budget planning, don’t forget the possibility of unexpected expenses such as home repairs or car troubles. To help pay for these sudden expenses if needed, you will want to think about building up your emergency savings. Building an emergency fund is an important part of managing your money successfully.
No matter how well you manage your money, you may benefit from reducing your spending. There are many creative ways to treat yourself without spending big. Game nights, picnics, and free museum days can all be fun, affordable ways to spend time with friends and family. Avoiding impulse purchases and managing your existing subscriptions might also help.
To help you stick to your savings goals, you could automate the amount you save each month. With direct deposits into your savings, for example from your paycheck, you may be less tempted to change your mind and spend that money instead. Even saving a seemingly small amount, like $10–$50 per month, could help you create a habit of saving.
If you are repaying debt on several higher interest loans, you might also consider a personal loan for debt consolidation. This may allow you to save money on interest, manage the debt more easily, and could potentially be cheaper over time. To see how much you may be able to save with a Discover® personal loan, try our debt consolidation calculator.
To help keep track of your finances, you could set a reminder on your phone for each expense due date and check each one off as they are paid. Then, check your accounts each month and note the change in your balances. This may help you monitor your progress toward saving. If you prefer, you could try an app or spreadsheet for budgeting or expense tracking to keep an eye on the money coming in and going out. Whatever method you use, focusing on your progress may help to ensure that your budget has you moving in the right direction.
Life happens. As things change, it’s okay to adjust your budget accordingly. No budget is set in stone. Maybe you enjoyed a pay raise. You might consider using some of that extra money to increase your savings. Have you run into a financial bump in the road? Look for ways to adjust your budget to balance your income and expenses for the time you need to regain your footing.
You will have months when you do not meet your goals, but don’t give up. The idea is to have savings to support you through life’s unexpected moments. Be patient and see your plan through and adjust it when you need to. Wise financial management should give you some peace of mind.
Learning how to manage money wisely takes practice. Just keep your goals in mind. If you do, you could be on your way to living your best life—and doing it within your budget. Budgeting isn’t always easy. Be sure to celebrate your success as you progress.
If you are wondering how you can get started to tackle some of your immediate expenses and pay off your debt more quickly, check out some additional tips:
The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover, a division of Capital One, N.A., or its affiliates.
