How to Stick to a Budget: Rules, Tips, and Apps That Work!

  • Budgeting, Saving Money, Smart Financial Goals
  • February 21, 2020
  • FCU Team

Do you have an extra $400 on hand for an emergency? If not, you’re not the only one. 27% of adults say they would either need to borrow money or sell something to afford a $400 emergency.

Why are so many Americans struggling financially? While many people suffer from overspending or they believe they need material items to signify their worth, a great majority just don’t know how to budget and save effectively.

If you’re not totally sure how to stick to a budget, here are some rules and mobile apps that may help you make better financial decisions.

Budgeting 101: The Rules of Budgeting

Before you can create your budget, there are a few budgeting and personal finance rules you should know. Here’s your guide:

Learning how to budget properly starts with tracking your spending habits.

Track Your Spending for One Week

Your budget needs to be realistic. Everyone has bills and necessary expenses such as groceries and gas. But how much do you really spend? How much of what you spend goes toward necessary expenses?

Keep detailed records of your spending for one week. Identify any undesirable financial patterns or bad habits. For example, do you have an issue with impulsive spending? Monitoring your weekly spending will help to identify this.

You’ll also be surprised how quickly small expenses add up. For example, if you eat out every day, you can save a significant amount of money by cooking instead.

Focus on Your Debt First

More Americans are in debt now than ever before. Credit card debt tops all debt sources — the average American has over $7,000 in credit card debt. Auto loan and student loan debt are the next most common forms of debt.

If you have any type of debt, you should prioritize paying off your debt before saving. Paying off your debt will improve your credit score and will open you up to better financial opportunities.

Include your debt payment plan in your budgeting plan. Plan how much you need to put toward credit card bills, auto loans, student loans, or any other debts you have. You should always pay off more than the minimum amount you owe.

Avoid Your Three Worst Categories

Most people’s spending tends to fall into three different categories. The most common examples include alcohol, food, and clothing.

Identify the three areas where most of your money goes (not including necessary expenses such as bills). Address these spending issues and get them under control them.

Use a Grocery List

While grocery shopping is a cheaper option than eating out, it may not be as effective when you shop impulsively. You can avoid those hungry impulse buys by using a grocery list. Making a list helps you pre-plan your meals and buy all the food and ingredients in one trip.

If you do decide to splurge, spend more on organic options rather than snacks. This way, you’re making better decisions for your health.

Set Budgeting Goals

Do you struggle with setting a weekly budget? You can still develop good spending habits by setting financial goals for yourself. For example, you can set a savings goal every week to bulk up your rainy day fund.

Save First

The best goal is saving first and then spending. We’ve all heard the classic advice to save any money you didn’t spend. But there’s no guarantee you’ll save money or the amount you save will contribute significantly to your savings. That’s why the best goal is saving first and then spending.

Set up an automatic dedication for a percentage of each paycheck allowing you to bulk up your savings quickly and effortlessly.

Cancel Your Subscriptions

Monthly subscriptions, such as streaming and shopping services, are convenient, but, they end up wasting lots of money. Even if the price is low, such as $7/month, these subscription costs add up over time.

Most subscription services come with a no-strings-attached cancellation policy. You can take advantage of that by alternating which services you subscribe to as often as you like.

Set Up Different Accounts

A good way to organize your spending is by setting up multiple bank accounts. You can use one account as your savings account, another one for bills, and another one toward your normal expenses. You can also choose a financial institution that offers more than one checking account option.

 

How to Create a Monthly Budget

Now that you know the rules of budgeting, you’re ready to create a monthly budget. Here are the necessary budgeting steps to take.

Start Before the Month Begins

Plan out when each bill is due and how much goes toward that bill. You can also plan any large expenses due that month; for example, if you know you need some car repairs, start saving weeks before your appointment.

Take Your Income Into Consideration

When budgeting, you should always know how much money is coming in. This is easy to do when you’re on a salary but more challenging if you’re paid hourly and your schedule fluctuates. If your income is unpredictable, budget week-by-week or however often you get paid.

Prioritize Fixed Expenses

Your fixed expenses are the necessary expenses, such as your bills. Always subtract them first from the amount you earn every month.

Then Subtract Your Common Monthly Expenses

Common monthly expenses are still necessary but not included with your bills. Groceries are a great example, but since these vary for everyone internet might be a better example. For many, the internet is necessary if you work from home or own a business, but not everyone needs the internet or would rather use the internet at a local coffee shop.

After you factor in these expenses, you can see how much money you have to use toward savings and spending.

Don’t Forget Your Monthly Goals

Remember the monthly goals rule? You should factor in your monthly goal spending before your leisure spending. These goals can include putting more money toward your debt, saving more, and even investing in retirement.

 

The 50/30/20 Rule

Many people also cite the 50/30/20 rule as another budgeting best practice. This strategy separates your three major expenses into three categories:

  • Needs
  • Wants
  • Savings

Our needs include bills, groceries, and insurance. While wants will differ for everyone; most people, they will include shopping, dining out, and hobbies. Savings is the amount that goes into your rainy day fund and investment accounts.

The goal of the 50/30/20 rule is putting a percentage of your income toward these categories. 50% of your income goes toward your needs, 30% goes toward your wants, and 20% goes toward your savings.

This way, you can always afford your bills, have money in savings, and still have money left over for spending.

 

How to Stick to a Budget: Tips to Keep in Mind

Even with this detailed plan, there are many ways to slip when budgeting. Keep these tips in mind when executing your budget.

Track Your Spending

Just because you’re more conscious and organized with your spending doesn’t mean you shouldn’t track your spending. Setting up a budget means nothing if you’re not ensuring your spending falls below the amount you make.

Tracking your spending doesn’t just mean tracking your leisure spending. Check your account and your budgeting plan with every bill you pay and each time you buy groceries. Any time you spend money, check your budget.

Checking your bank account and spending every week will ensure you’re in line with your plan and you’ll know where your budget stands with no surprises.

Keep a Buffer

Most budgeting plans don’t account for a buffer, which is a set amount you should have in your bank account at all times. A buffer protects your bank account from overdrafts and miscalculations. If you can, it’s a good idea to always keep at least $100 in your bank account at all times.

Save for Large Expenses in Advance

Don’t wait for the month of a large expense to arrive to start saving.

For example, do you know when you’ll need to go out of town or take a vacation? You should save for this long in advance. Plan for every cost associated with this expense, such as airfare, lodging, food, entertainment, and keep a buffer in case the trip is more expensive than you anticipate.

You May Need to Adjust Your Budget

Most people need to adjust their budgets every month. That’s because our expenses fluctuate all the time. For example, you’ll likely spend more money on utilities during the summer — the weather is warm and the A/C is blasting all day and night.

If you can, identify any spending changes per month and season. Plan to put more money aside during this time and be mindful of your spending.

Beware of Overspending on Others

One major spending mistake many people make is spending excess money on others. Sure, you may want to spoil your significant other or treat a friend to dinner and drinks, but always remember your spending should prioritize you and your needs.

 

The Best Budgeting Apps to Try

Are you struggling to budget, even with this plan and this advice? Not to worry, there are many budgeting apps on the market to help get you on the right track.

Don't be shy when it comes to trying different budgeting apps until you find the one that's right for you.

Zero-Based Budgeting Apps

“Zero-based budgeting” is an idea that every dollar you earn goes toward something important. If you’re not sure how to make every dollar count, there are a few apps that can navigate your spending for you. Popular examples include EveryDollar and YNAB.

EveryDollar is best for those who want to better plan their purchases and track their spending. YNAB makes a plan for every dollar you earn. EveryDollar is free (but they offer a paid option) and YNAB starts at $84/year (you pay more than that for Netflix).

All-Inclusive Budgeting Apps

Are you looking for an all-in-one budgeting and saving app? You have many options, but Clarity Money is a popular one. This app links to your financial institution and tracks your spending, organizes your expenses, and even monitors your credit score.

Spending Apps

Do you want a clearer view of your spending habits? An app such as PocketGuard provides a snapshot-like view of your spending. They also show how much more money you have to pay bills and other expenses.

Envelope Budgeting

Before online banking, envelopes were the secret to a solid budget. You may recall your parenting having an envelope for bills, an envelope for groceries and necessary expenses, and an envelope for leisure spending.

Today, no one puts money in envelopes. But, the moral of envelope budgeting still stands — separating funds into different categories.

If you struggle to do this on your own, Goodbudget is a free app that uses the envelope budgeting method. They separate a portion of your earnings and place them into different spending categories.

Florida Credit Union Understands Your Financial Needs

Is better budgeting on the top of your goals list? We understand the difficulty of creating a budget. Analyze your finances and your spending, find any spending or saving problems and use this to improve your finances.

The financial institution you choose also impacts the way you manage your money. You should find a credit union that understands your financial needs and will support you. Credit unions can help in many ways, from offering debt consolidation, balance transferring services, and refinancing your mortgage.

Still not sure how to budget and save? We offer financial education so everyone can improve their budgeting.

Florida Credit Union is a full-service financial institution. Founded in 1954 as the Alachua County Teacher’s Credit Union, FCU now services over 100,000 consumer and business members in 45 counties throughout North and Central Florida. For more information about the services we provide, visit FLCU.org or call us at 1-800-284-1144.