When you hear the word budgeting tips, it’s like that feeling when you’re full flow on the dance floor – cutting shapes that would make Michael Jackson proud – and then the lights come on.
“What?!?! It can’t be home time already! The party’s just getting started.”
But budgeting is not the party killer everyone thinks it is. It isn’t about restricting or cutting the fun out of life. Budgeting is about spending intentionally.
You’re being prudent with your cash; making the best use of it now, while also ensuring you’re putting something aside for your future – and your future self is going to thank you big time!
For anyone creating their first budget, I wrote a step-by-step guide that will walk you through the process.
If you’re ready to level up your savings game, here are my top budgeting tips for beginners.
Create A Budget You Can Easily Stick To With My Top 10 Budgeting Tips For Beginners
1. Cut Yourself Some Slack In The Beginning
My first budgets were a disaster!
I would always be way over budget with half the month still to go.
When first starting to manage your finances, you’re more likely to forget about quarterly or annual bills, or expenses will arise that not even Mystic Meg could have foreseen.
Allowing for miscellaneous expenses in your budget will stop you dipping into your emergency fund or pinching from other categories.
This doesn’t have to be a permanent line item in your budget, and you can remove it once you’re nailing your budget consistently.
2. Make It Realistic
To give your budget the most chance of success, it must be realistic.
Although you would love to start socking away another £500 a month right away, it just may not be possible.
Review your current spending and decide where you can tighten the belt.
Things that aren’t bringing you value or that are associated with bad habits that you want to stop should be the first to go. BUT, don’t make drastic changes initially!
Selling your car, refusing all social events and cutting your own hair will save you money, but it may also make you miserable… and turn you into a bit of a weirdo.
3. Set Goals
Having goals is critical for keeping your budget on track.
Unless you’re a financial nerd like me, you’re not budgeting just for the fun of it, but because you’re likely working towards a goal.
If you’re saving for something big and exciting – like a wedding or family trip to Disneyland – remind yourself of it daily.
Make a screensaver for your phone, and if your bank allows, rename your account “Wedding”, “Disneyland” or whatever gives your savings meaning.
Not saving for anything specific? Still set goals to gamify saving.
Setting yourself a challenge can make all the difference in whether or not you stick to your budget.
You could try a no spend month, not using the car at weekends, or set a goal of increasing your savings every month (even if it’s just by a penny).
If you make saving fun and connect your budget to a deeper “why”, it will be much easier to stick to.
4. Create A Zero-based Budget
I first learned about zero-based budgets from Dave Ramsey.
If you’ve never heard of them before, it’s where you allocate all your income to an expense so that you’re left with zero at the end of the month.
If you’ve covered all your expenses and there’s money left over, create a savings category and allocate it there.
If every penny has a purpose, then you find you won’t “accidentally” end up buying new clothes.
5. Prioritise Your Most Important Categories
It’s common sense, but I’ve still got to mention that you should plan to cover your essential living costs before anything else.
The “pay yourself first” principle popularised in Rich Dad Poor Dad is nonsense.
You’re not going to be more motivated to hustle if the bank’s calling to find out where their mortgage payment is… you’re just going to be stressed and sleep-deprived.
And also, don’t be a neat freak and list your expenses in alphabetical order.
Your budget should be listed in a hierarchy of needs, with the essentials at the top (mortgage/rent, food shopping, gas and electricity) and the more frivolous items at the bottom.
Pay your bills top down.
6. Budget As A Couple/Family
If you’re in a long-term relationship, then I would suggest having a joint budget.
You’re probably already sharing bills, so it’s a good idea to hold a household meeting once a month to review the previous months spending and plan for the upcoming month.
If your partner isn’t as into the whole “money thing” as you, don’t force it on them.
Make the meetings fun – breakfast meeting over pancakes – and discuss your progress towards goals that have meaning to you both.
Budgeting is a team sport. It’s essential your significant other is on board with your thrifty plans as any changes you wish to make are likely to affect them.
7. Plan For The Unexpected
We’re all faced with months where keeping to a budget feels impossible.
There’s always going to be challenges whether it’s a birthday or holiday to be celebrated, a can’t-miss event that everyone’s going to, or the washing machine breaking.
Don’t give up! Planning for irregular expenses gets easier the longer you’ve been budgeting.
Even tricky things to budget for like car and home maintenance gets easier with time – you get to know the average costs of keeping a car running over a year if you keep tracking your expenses.
To prepare for one-off and irregular expenses (such as gifts, holidays and maintenance) set an amount to save each month and add it to a savings account if it’s not used up.
You will need it eventually.
8. Consider The Envelope System
The envelope system is an old-school method of budgeting where you divide your cash for the month into individual envelopes.
Once there’s nothing left in the envelope, there’s no more spending in that area till next month.
Although time-consuming, the envelope system is highly effective as it makes it difficult to overspend.
If it all sounds like too much hard work, most banks now provide sub-accounts that allow you to operate the same system digitally.
I still use the old-school envelope system for my entertainment budget.
Having physical cash makes it easy to split bills when out with friends and for leaving a tip.
Plus, it’s easy to keep saying yes to the fun stuff, and the envelope acts as a physical reminder to rein it in.
9. Keep the Fun Money
When I first discovered financial independence (FI), I pretty much stopped wasting money overnight.
I’d done the maths, and I knew I could quit my job in just ten years if I were to adopt extreme frugality.
Entertainment and eating out was the first thing to go – much to the dismay of my wife, who doesn’t share the same enthusiasm for FI as me.
But I quickly learned that a super strict budget wasn’t sustainable for us.
It killed the fun in our relationship.
We like the occasional coffee or meal out, and we both valued our little, mini-dates.
We now allocate £100 a month to entertainment and spend it guilt-free.
Long-term success with budgeting is not about cutting out all discretionary spending.
Doing so will only make you miserable.
You’ve got to get the balance right between enjoying life now and saving for the future.
10. Experiment With Tightening The Budget
The vast majority of us live in our comfort zone, and there is always a little wiggle room in our budget.
If we had to, most of us could find a way to save another £100 a month.
So, I challenge you to do to exactly that.
Try living a little more frugally for a month and take on the £100 challenge.
You could try reducing the amount you spend at the supermarket, not eating out as much or cancelling a membership you’re not using.
Cutting your expenses is the quickest and easiest way to save money.
If you stop doing something but find that you’re missing it, you can always add it to the budget again.
But at least you’ve saved an extra £100, and you now know that your money is being spent on things you value and enjoy.
Wrapping It Up
If you want to stop living paycheque to paycheque, get out of debt once and for all, or just keep more of your wage each month, a budget is your answer.
Budgeting is not the dirty word everyone thinks it is. It doesn’t restrict you from living life to the full. It is simply a means of being intentional with your money. It ensures that your priorities are met, and you’re not spending mindlessly.
A carefully crafted budget doesn’t take away your freedom; it gives you more.