The number one rule to financial success: spend less than you earn. And the best way to do that is to keep track of what you spend. Here are 10 tricks for crafting the perfect budget (and sticking to it).
10. Start From Scratch
If you have a budget that isn't working from you, wipe the slate clean and start over. If you haven't really created a successful budget before, start with the basics: how much do you spend on bills every month? How much are you/would you like to invest? How much would you like to save and spend? Once you've divided up your money into those basic categories, you have a pretty good foundation to build a more specific budget—even if you don't have a regular paycheck.
9. Account for Every Dollar
Building off #10, make sure that you've accounted for every dollar you make. That sounds overly meticulous, but it isn't: all it means is that you should "spend" all your money in your budget each month. And that doesn't necessarily mean spending it on stuff—it could mean saving it or putting it toward your 401(k). Some people do better with reverse budgeting, but for most of us, splitting your pay into categories is the best way to make sure it's all accounted for.
8. Focus on What Really Matters
When most of us think of budgeting, we think of the basics—rent, food, utilities—then go straight to "how much can I spend on the fun stuff?" But our minds often trick us into prioritizing wants over needs. As you build up the specifics in your budget, think of Maslow's Hierarchy of Needs: your physiological needs (food, clothing, shelter) are most important, followed by safety (insurance, utilities), and so on, down to the luxeries, which are the least important. Think of it this way: true wealth isn't about stuff, it's about having the freedom to do what you want with your life.
7. Prioritize Your Debt
If you've racked up some debt over the years, your budget needs a bit of extra special care. Whether you're completely broke, living paycheck-to-paycheck, or doing alright, you should prioritize getting out of debt now. Check out this step-by-step guide to getting out of debt for more info.
6. Track Your Budget Using a Strategy That Works for You
There are a billion budgeting tools out there, from simple spreadsheets to full-on budgeting apps right down to simple pen and paper. What works for you may be different than what works for others, so think about how you learn and where your weaknesses are to decide on the best strategy for you. Maybe it's a program like Mint that tracks your spending automatically, maybe it's creating a spreadsheet, or maybe it's one of these other popular tools. If you find something isn't working for you, try something else—but make sure it isn't your motivation that's lacking, either.
5. Use Separate Accounts
If you have trouble tracking your money when it's all lumped together, consider putting that money into separate "buckets" for each category. For example, have a savings account for your savings, one checking account for fixed expenses, and a second checking account for your spending money (which includes anything from groceries to "fun"). That way, you only "see" the money that you can spend, without having to think about what's coming up next. This isn't something everyone has to do, but many of you have noted that it's helped you out a lot.
4. Give Yourself Some Wiggle Room
Lest you worry that we're becoming too hardcore, remember that phrase "everything in moderation." If you budget too meticulously, it's only going to stress you out—and probably fail. Give yourself reasonable expectations, make sure you stash enough away for an emergency, and don't forget to budget money for fun! If you're the type that splurges, maybe you need to create a splurge budget to avoid overspending. Or, only allow yourself to use that money once you've accomplished other goals. Whatever you do, don't neglect the fun—and give yourself some wiggle room for those unexpected expenses.
3. Know Your Weaknesses
We all have weaknesses—after all, materialism is pretty ingrained into our culture and lifestyle. As you create and monitor your budget, give special attention to the areas you know you're weak—whether it's eating out, making big impulse purchases, or just addictive shopping. Strengthen your mental fortitude for those bad behaviors to keep them in check.
2. Adjust Your Budget as Time Goes On
Chances are, you won't get your budget exactly right the first time. If, after a few months, you find that it needs some tweaking, do it! Furthermore, life changes often mean changes in your budget. Going back to school? Obviously you need to start over to budget money for that. Get a raise (or a pay cut)? You'll need to adjust accordingly for that too. Everyone's budget is different, especially depending on your salary. If you need inspiration, check out some of the sample budgets we've featured over the years.
1. Stick to It
Lastly—and this is the hardest part for most of us—you have to stick with it. If you put all this work into creating a budget and don't keep up with it, well, obviously all that work was for naught. Keep track of it every month, wait 48 hours before making any big purchases, and most importantly, accept that every once in awhile, you'll blow it—and that's okay. The best way to keep your budget is to have a healthy relationship with money, and not let it stress you out. If you can do that, you're golden.