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Before I talk about budgeting tips, I want to ask you something. Have you ever heard of the Fyre Festival? It was supposed to be this amazing music festival taking place in the Bahamas in 2017. For a relatively affordable price, festivalgoers were promised luxury cabins, world-class accommodation, and great music. It sounded too good to be true–because it was.
The festival was one of the biggest flops of the decade. There are many reasons for this, and there’s a Netflix documentary on the topic if you want to learn more. But I want to focus on one reason specifically: they didn’t have the budget. They promised too much for what they could afford and ended up becoming the laughing stock of the world.
Looking back on the Fyre Festival, there’s an important personal finance lesson we can learn: stick to your budget. It might sound obvious, but you’d be surprised at how many people try to live beyond their means. If you don’t want to flop like the Fyre Festival did, check out these 20 must-know budgeting tips:
It’s easy to say you want to budget and start doing it. But the real test is continuing to follow said budget after a year or even just a few months. As with any commitment, it’s crucial to understand your “whys” and keep them in mind going forward. That way, you won’t give up on your budget so easily.
Once you know why you want to budget, sitting down and setting one is simple. First, you have to get your net income. This is all the money that you take home after any necessary deductions like taxes. Then you divide this into different budget categories.
Once you’ve decided where all your money is going (remember to account for every cent!), you have yourself a budget. You can check out my in-depth article on how to create a budget if you want to read more.
Before setting up your budget, you first need to know how much money you’re earning. Take everything you earn from your salary, side-hustle, and other bonuses, and put those in your budget. You need to remember this budgeting tip to make sure you’re not spending more than what you earn.
It’s important to monitor your spending habits, so you know where most of your money is going. It’ll be easier to set a budget once you estimate how much you’ll be spending for your specific needs.
Billionaires like Dave Ramsey recommend spending no more than a specific amount on certain budget categories. This guarantees that you’re not overpaying for your needs. I’ve written a guide on this topic that you can check out here.
I set my monthly budget on the first of every month. It’s good to set your budget early because you can accurately plan out most expenses for the month. Some months will inevitably call for more spending than others, like December. Be sure to follow this budgeting tip diligently if you want to see the most change over time.
I understand that not everyone has the patience to set a specific monthly budget. It isn’t for everyone! If monthly budget plannings aren’t your thing, try out a budgeting system instead! These are ways you can split up your income the moment you get paid. I’ve listed down some of these systems here.
The 50-30-20 rule is a simple budgeting philosophy—50% of income for your needs, such as rent, food, bills, and more. Then, you can use the 30% to save, invest, or pay off your debts. With the last 20%, you can spend on anything you want. It’s a great starting point for people first getting into personal finance.
This rule is less specific than the 50-30-20 rule. The 70% is allotted for needs, while the remainder is for savings or charity.
When setting up a budget, make sure that every single cent is accounted for. Every dollar that you’re not planning to spend, save, or invest has no use.
When following a budget system like the 50-30-20 rule, having separate accounts for your money helps a lot. Having an account for your needs, savings, expenses, and wants, you’ll easily see how much is left in the budget.
After every paycheck, make sure that you’re separating your “wants” budget first. That’ll make it easier to stop yourself from spending over your budget immediately.
Among the many budgeting tips on this list, this isn’t specifically focused on making a budget. By selling what you don’t need anymore, you’ll have more money to go around to things you’ll actually need.
If you think you’ll be spending more in the future, like for holiday gifts or a vacation, start saving ASAP! This will make it easier on the wallet when the time comes to actually pay for these things.
One of the most important budgeting tips to remember for any beginner is to always allocate money towards emergencies. Don’t spend all your money taking care of your immediate needs. Doing this will mean you’re helpless in the event of an accident or health issue. You never know when these things can happen, so it’s best to be prepared.
It’s also smart to set money aside towards your retirement, especially if you already have a retirement account. Your employer could be offering you free money whenever you contribute to a 401(k) and you might not know. Read my article on the different investment accounts here.
When setting a budget, make sure it’s realistic! Your budget should be something that you can follow consistently. If it’s too challenging to live by, then you might want to rethink your strategy, sis.
When living by a budget, you will make a mistake at some point. I know I did. When this happens, don’t beat yourself up! Take note of what happened and keep it in mind going forward. It’s important to bounce back when you make a mistake.
Frugality doesn’t start by looking at a list of budgeting tips, sis. It’s up to you when you want to put your plan to action. If you want to start being smart with your money, don’t wait–start today.
However, starting is easier said than done. To make things easier, you can get yourself a support group where you can share your experiences about budgeting. When you’re part of a group, it can be a lot easier to continue a habit. My Wealth Builders Facebook group is the perfect safe space for women looking to wisen up about their finances. Join today and start budgeting towards your best life with us!