These 10 best budget habits helped my family pay off $72,000 of consumer debt in two and a half years on one income. You know how we did it? We consistently made a zero-based monthly budget and stuck to it. Even though we’re debt-free now, we still budget each and every month. No matter what situation you find yourself in, budgeting will help you take control of your finances. Use these tips to achieve budgeting success!
10 Best Budget Habits
1. Find the reason why you’re budgeting and refer to it often.
Find the reason why you’re budgeting in the first place. Your reason should be so clear in your mind that it can snap you out of a funk and get you back on track. If you don’t have a strong reason to budget, you’ll just throw in the towel at the first sign of trouble.
I decided that becoming debt-free was the best financial goal for my family. I knew that I needed to figure out how to save money, cut expenses, and pay more towards debt. Budgeting was the catalyst that guided me to achieve these goals.
Even now, we continue to budget in order to stay debt-free and build wealth. Your reason may be entirely different than mine. Maybe you’re tired of living paycheck to paycheck or maybe you’ve realized that you need to save for retirement.
Whatever the case, find your reason and refer to it often. Your burning desire should be so strong that it will push you through the tough times. Read this post to learn more about living a debt-free lifestyle, Debt-Free Living, A Beginner’s Guide.
2. Budget consistently.
Sit down and consistently create a different budget each and every month. Don’t underestimate the power of planning and creating a budget based on your current priorities. If you think that you can track it all in your head, I’m here to tell you that you’re living in a fairy tale.
Before my debt-free journey, I honestly believed that I was great at budgeting. Thinking I was smart, I recycled the same budget each month. In my defense, I figured that my family’s income and expenses stayed pretty much the same, so why even bother changing it.
What I failed to realize is that life is not static. It’s changing constantly and our spending reflected that. I just never bothered to track it. Unfortunately, I failed to see the ebbs and flows of my family’s spending habits.
You may need to increase or decrease utility costs depending on the month. If you recycle the same budget monthly, you won’t see these nuances.
Life changes too. What you may have thought was a priority a few years ago may not be needed now. You won’t realize it if you don’t take the time to look at your budget each and every month.
Budgeting consistently forces you to question your spending habits and analyze your income on a monthly basis. You’ll be an active participant in your finances. When you have money left over at the end of the month, you decide where and when to spend it instead of spending it haphazardly.
3. Write it down.
Whatever method you decide to do, memorialize your budget by either writing it down, tracking it on a spreadsheet, or using budgeting software. This is an extremely important step. When you write it down, you’ll be able to get a clear picture of your finances. Memorializing your budget is also your unspoken pledge to your spending plan.
4. Be realistic and honest about your finances.
Be realistic with your budget. If you need to spend $500 on groceries, don’t kid yourself and cut it in half just to stay within budget. Your budget is simply a spending plan that prioritizes your expenses and savings. If you don’t have enough to pay your expenses and stick to your financial goals, cut back realistically, increase your income, or do both.
If you’re not honest about your finances, you’re only hurting yourself and your family. You can’t make changes if you fudge the numbers or leave out expenses knowingly. Use the budget as a tool to see if your financial goals match your income and expenses.
5. Track it faithfully.
Budgeting is more than just planning it out. The magic is in the details. Tracking your spending guarantees to show you if your budget is working. Without these details, you’ll never know how you’re doing.
Posting your transactions isn’t easy in the beginning. Trust me, if you’re committed to budgeting, you’ll find the time. Soon enough, it will become second nature.
Figure out what method works best for you. Either post your transactions right away, in the morning, or at night. Everyone is different, but keep at it and figure out what works for you.
6. Save and invest.
Don’t forget to include saving and investing. Learning how to plan for major purchases and investing in the future must be a major component of your budget. I’m sorry to tell you that no one else is going to save and invest for you.
This was probably the best habit that I learned about budgeting. Now, I save intentionally for holidays, home and car repairs, and birthdays. Saving consistently ensures that you’ll have the money ready when you need it.
7. Stay flexible.
Stay flexible, review your budget, and tweak it if it’s not working. When we were paying down debt aggressively, we restricted our personal spending money to the bare minimum. And you know what? It was miserable. We almost gave up.
That’s when we decided to increase certain categories to give us more breathing room. Sure, it may have added a few more months to our debt pay off plan. But, we knew it was a better decision to figure out how to stay on the plan, instead of giving up entirely.
8. Budget in some fun money, even if it’s a small amount.
Don’t fool yourself into thinking that you can survive without budgeting in some fun money. If you restrict yourself too much, you’ll end up resenting your budget and feeling deprived. If you’re struggling to pay all of your bills, still budget a small amount for fun. Don’t throw all of it at debt payments or savings.
9. Add wiggle room.
The most frustrating thing is going over budget. Add a little wiggle room, so you won’t be caught off guard. When you first start budgeting, you might not even know how much to budget.
Most of us underestimate how much we spend on food, personal expenses, and transportation. Give yourself some breathing room, especially in food categories like groceries and dining out.
Life is unpredictable. Build your budget with this in mind, and you’ll save yourself some heartache. Create an unplanned category. If you don’t need to use it, you can decide what to do with the extra money at the end of the month.
10. Share the responsibility with your spouse or find an accountability partner.
If you’re married, share the budgeting responsibilities with your spouse. Share your financial goals and dreams with your spouse. Explain to them that budgeting is a tool that will help you achieve those goals.
I can’t stress enough how important it is that you and your spouse are on the same page about your finances. When both of you create the budget together, you’ll both be invested in seeing it succeed.
If you’re single, find an accountability partner. Make sure that the individual understands your financial goals. Find someone you can trust and you’re comfortable sharing your finances with. Let them know that they have permission to question you on your spending plan if it doesn’t align with your financial goals.
Budgeting is the main reason I learned to take control of my finances. It took my hubby and I a few months to prioritize our spending and figure out our budget. Looking back at it now, I wish someone would have shared these 10 best budget habits with us in the beginning. We would have avoided some pretty obvious budgeting mistakes. Live and breathe these budget habits and you’ll reach your financial goals in no time.
For more information on common budgeting mistakes, please read the following two articles:
Budgeting Mistakes that are Costing You Part I or Budgeting Mistakes that are Costing You Part II
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