15 Practical Budget Tips
Budgeting the terrible B word. Unfortunately, budgeting still has a negative impact on many people, but actually it is nothing more than making a plan for your money.
Budgeting means that you are going to spend your money in a targeted way, actually organizing, for the rest of the month.
People often think that if they are going to budget, they can no longer do anything or they are afraid of what they will encounter when they start budgeting.
Not budgeting is basically sticking your head in the sand (Dutch expression, but you know what I mean right?).
If you don’t look at it then it’s not there. This way you only get into financial problems instead of ensuring that you keep your finances in order.
In fact, with a budget you can do the things that you like, because you are going to reserve money for that. That is budgeting.
A budget does not limit your freedom, but it gives you freedom! The point is that you consciously give your money a purpose.
How can budgeting help you?
A budget gives you a clear picture of where your money goes every month and you make an action plan so that you can determine where it goes. You are in control.
By budgeting you can achieve your goals. It doesn’t matter what your goal is. Whether that is paying off debts, saving for your pension, or wanting to build up an emergency fund for unexpected expenses doesn’t matter.
The moment you have done planning your own budget, you can even find more options to spend money on. The moment you reserve money for something for yourself, you can also spend it without feeling guilty. Many people have retained extra money even after they have started budgeting instead of being short of it before. How wonderful is that?
Are you ready for it? Here they come!
1. Budget to zero (before the new month starts)
This means that, before the new month starts, you will make a plan for every dollar or euro that comes in to your bank account. You start with zero and you distribute all your income for that month over the coming month. At the end of the month your bank account will be zero again. This is how you made a destination for every dollar or euro. This does not mean that you have to spend every dollar/euro, right 😉
2. Do the budgeting together.
If you are married or living together, it’s important to sit down and get your noses in the same direction when it comes to money. It doesn’t matter how you divide the money, as long as you agree together. It’s better to argue about it at the start than to dissolve later due to misunderstanding or disagreement. That’s not worth it. If you are single, it’s good to talk to a friend about it. Ask if they can help and support you in achieving your goals.
3. Every month is different.
One month you have to buy school supplies for your child (ren), the other month it’s a defect on the car and in December (yes every year again) it’s Christmas. You will have to make a budget for the entire year to cover these costs. You know that the children go to school again in September and that this entails costs. Be prepared for this. Don’t be surprised and make sure you reserve a monthly amount for every occasion. So you can save all year for Christmas, birthdays, school, vacation or car. Set a fixed amount each month so that you will not be surprised. Create separate savings accounts for this or use the cash envelope system for this.
4. Start with the important categories first.
You first plan the fixed costs such as the rent or mortgage, the energybill, health insurance, insurances and the other ones that you must pay foreach month first. These amounts come back every month and are often the same.
Then you look at what’s left over and then you make an order of importance. The groceries and the saving funds, and only then the luxury things such as clothing, eating out and other things you want to spend money on (if there is a budget for that).
5. Pay off debts.
If you have debts, it’s one of the most important expenses that you are planning and that is paying off. By using the snowball method you ensure that you have repaid the debts as quickly as possible. The snowball method is also described in the Total Money Makeover from Dave Ramsey.
Really attack your debts, you want to get rid of this as quickly as possible, so instead of reserving money for things like clothing or other things that you don’t really need, first make the debts your priority.
6. Don’t be afraid to cut back on your budget.
It might be time to cut back. If you have to start living on a tight budget, it’s handy to use some cuts. Maybe not always nice, but it is good for later. Then you will benefit again, just think.
Decrease luxury, unnecessary things such as eating out, clothing, sports, cable television or netflix. Go to a cheaper supermarket and say no more often. You can add these things to your budget later if you get more space in your budget.
7. Make a plan and stick to it.
Make sure you know on what date certain costs will be collected in your bank account. Know when the rent or mortgage and other fixed costs will be deducted. You can often also select the date yourself, so that it’s collected when you want.
In addition, you can make a plan for the rest of the month for your other categories yourself. For example, do groceries twice a week and reserve a certain amount for this. You can also do this very well with the cash envelope system. By knowing what is coming you reduce the stress for yourself, because you know that it’s well organized in the way that you put it away for yourself. So make sure your schedule is correct.
8. Make it a team sport.
If you are married or living together, it’s important to regularly talk about the budget. Determine together where the money goes. Schedule an evening together every month and sit down. Then you won’t have to worry about it for the rest of the month.
Make sure that it’s not an evening that you are going to look up to. Makes it cozy by adding something tasty for example.
Look ahead, but certainly also look at the past month. How did it go? Have we come out well? Where did it go wrong and how can we prevent it the next month? Do we have to adjust amounts up or down?
See it together as a challenge to create a great plan together. Make common goals that make you happy. Come up with a nice goal like a vacation. The moment you start saving for that, you are both motivated to spend as little as possible on groceries and other extra expenses. You will see that it really works that way and that you have achieved your goal earlier than without these budget meetings.
9. Provide a buffer.
Set aside a small amount every month for unexpected expenses. Make this a separate category. A refrigerator or washing machine that breaks or an unexpected car repair are annoying things that suddenly come around the corner.
Step 1 of the seven steps to financial freedom is making an emergency fund of $1000,-/€1000,-. It doesn’t necessarily have to be that much, but it is important to ensure that you have money in hand for unexpected costs.
10. Cut your credit card in half.
If you are really determined to do this right thing, you are going to stick to your budget and make sure you no longer have any debts, then you must now cut your credit card in half forever.
Stop using them. Cut them in half or return them to the bank.
You reduce stress and worry when you no longer have them. It’s the means to get into debt easily and you really want to prevent that.
You only need your bank card. You can pay with money that you just have in the bank at that time. If you think disposing is too big a step for whatever reason, give it to someone who can save it for you.
11. Use the cash envelope system for variable expenses.
If you regularly spend too much money on, for example, groceries, it’s handy to work with the cash envelope system.
Go to the bank every month and withdraw the amount of money that you have reserved for this category in cash. Divide the money you need per week into separate envelopes or calculate what each week can take out of the envelope for the groceries. Do this also with other categories that you will find under the variable expenses.
This way you keep a close eye on the amount and if the envelope is empty, you have nothing left to spend on it for the rest of the month. That way you keep a grip on your budget.
12. Try an app or online cash book.
If pen and paper is not your thing then you can keep track of your budget with a budget app or an online tool. You can then easily determine your budget and place it in the categories.
13. Stop comparing.
Do not compare your situation with that of another. It doesn’t motivates you and by focusing on your own budget you will see that you will achieve more results than when you’re only concerned with what other people are doing.
See what is good for you and your family.
14. Set goals.
The moment you are in the process of paying off debts, building up an emergency fund or paying off your mortgage, don’t forget what you are doing it for. Focus on your why! What is the reason that you make these sacrifices.
Make these goals visible to yourself and keep in mind that in addition to these goals you can also have beautiful personal goals, such as a holiday or a car.
15. Give yourself permission to make mistakes and give yourself a compliment.
It often takes a few months before you get the hang of budgeting. It really won’t go perfect right from the start and that’s okay. It really doesn’t matter if you have not been able to stick to your budget plan.
See where things went wrong, search for a solution for the coming month and continue. Don’t look back, but look ahead. By trial and error you learn to deal with it and you start to achieve results. By not doing anything you will not get ahead. And you really get there this way.
So certainly also look at what went well and reward yourself for that!
Over the last 20 years Jolanda has raised her son by herself and has experienced how hard life can be for a single mother. Health issues, losing her job, relationship issues and financial problems where just a few of the hurdles that life had in store for her.
But she always comes back from that valley and she picked herself up. Always taken other steps to see where it could take her. Looking for possibilities instead of impossibilities. That's her motto!
She is a budget coach, a life coach and has much down to earth Dutch experience.
She is most known for her blogs about saving money, making money, her printables and many tips and advice about life itself.