Building and maintaining a budget can be tedious, so here are 8 tips on how to budget.
These tips are mostly for the people who hate to budget and want to make it as painless as possible.
A budget is not just about money, it’s about your psychological well-being. Often people save money at the expense of their wellbeing and this is something I want to help people avoid. In fact building financial wellbeing is one of the pillars of this blog.
So these tips on how to budget can also help you overcome negative emotions about money. Hopefully they will help you on your way to building a positive relationship with money.
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The Best Intentions But Limited Results
You might also feel that despite your good intentions, you’ve just struggled to get the ball rolling with saving.
Most people will be able to empathise with trying to lose weight and being healthy but not being able to shift those pounds.
It’s exactly the same thing with money, but the right information and tips on how to budget can make a world of difference.
Failing at anything but especially saving money can be disheartening, and this is a feeling we want to avoid.
Saving money and investing for your future is an exciting process, when you get it right.
So, these tips on how to budget can also help you get started and on the path to consistent money saving.
#1 Start Simple – Don’t Get Overwhelmed
Don’t bite off more than you can chew. Keeping it simple in the early stages is essential.
Spending behaviour and money psychology is complex, and if you try to decipher it in one go, you will feel overwhlemed.
With this in mind, I would use a very simple budgeting template to structure your finances, in a way that you can build on.
Using something like a reverse budget, you can very quickly work out how much you will most likely save and spend each month.
#2 Choose A Budget That Suits Your Personality
The next step is all entirely dependent on your personality. Like I said, many people find budgeting tedious, and that’s because they choose the wrong type of budget.
You really need to consider:
- How much time and maintenance your budgeting system involves
- How strict will you be with your requirements
- Are you open to using excel spreadsheets?
- Do you want to frequently detail and track your expenses?
- Are you naturally more inclined to save or spend?
There are at minimum; 5 types of budget that I believe have a meaningful impact. Both in terms of maximizing savings and psychological well-being.
Saving money isn’t just about the money, it should comprehensively cover all aspects of your wellbeing.
You shouldn’t feel anxious about saving or guilty about spending, and so your budget should be designed to resolve all of these issues.
When I first got started on my saving journey, I found budgets restrictive and they made me feel like I was always failing. When I actually succeeded I felt guilty for spending.
Moving to an appropriate 80/20 style budget helped me resolve these issues.
#3 Make It Trackable
Something I would suggest, at least in the early stages is to track your saving and spending. In quite a granular detail; you can use my Ultimate Money Dashboard or Excel Budget For Monthly Financial Tracking to do this.
You need to be able to actually categorise and visualise where your money is going. This way you can focus on where you need to cut your spending. The above tools can help you do this.
When I first started doing this, I was surprised. The things I felt guilty about buying formed a very small percentage of my spending. By contrast, the things I simply didn’t care about accounted for a high proportion of my expenses.
This simply doesn’t make sense. By resolving this issue I had more money for the things I loved, and worried less about splurging on them.
#4 Keep Yourself Accountable
These first few tips on how to budget should now have given you some of the systems to put you in the right direction.
The next step is to keep yourself accountable. Hopefully, using my reverse budget you will have set a savings goal.
You should keep yourself accountable to this target. You can also use my net worth tracker, to make sure your net worth is heading in the right direction.
Although, my Ultimate Money Dashboard is something that combines both the reverse budget, spending tracking and net worth tracker all in one go. (with awesome visualisations).
Check it out on Etsy and get a 50% off code before you buy.
#5 Be Flexible & Don’t Be Too Hard On Yourself
The flip-side to the above point is to not be too hard on yourself in the early days. Your spending and saving is volatile and can peak and trough over the months.
Remember it’s natural for people to feel guilty about spending money and being self-critical will only diminish your ability to save.
So don’t get upset if you miss your goals, because it’s more important to understand your finances, than to control them.
These tips on how to budget are all about setting up healthy and successful systems, rather than dictatorial budgeting laws.
Sometimes you will find that the amount you wanted to spend on groceries for example, is simply not realistic.
Maybe that thing you thought you could go without, has a more positive impact on than you first though.
#6 Don’t Let The Miscellaneous Section Get Too Big
There are many items of your spending that won’t actually fit a distinct category. That’s absolutely fine.
It can be tempting to throw everything into the miscellaneous pot of spending. However, this can often be where the real money saving gold is.
If it’s miscellaneous, it clearly doesn’t stand out as being distinctly important to you. Therefore, where possible, you should try to group up things within the spending pool.
Remember, that the purpose of this is to understand our spending. So that we can mercilessly cut the things we don’t love, get them out.
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#7 Start By Focusing On Accomplishing Better Wellbeing
As I mentioned above, budgeting should be about more than just money. It’s about your overall financial wellbeing. Do you know how many people have sleepless nights over money?
This is counter-intuitive, but often focusing on becoming more minimal, more balanced and happier often has a knock-on effect on your spending.
Directing your money to positive experiences or outcomes such a good book or investing in your future, will not only channel your spending, but improve your lifestyle (long-term).
< The Positive Psychology Of How You Can Buy Happiness >
When I focus on getting out into the Yorkshire Dales for fresh air, scenic views and exercise, I actually have no opportunity to spend money.
I am happy at the moment, and all the while I know my investments will one day create enough passive income for me to do this whenever I want.
By focusing on living for today and planning for tomorrow, we understand the reasons and goals of budgeting and saving. This drives our behaviour.
#8 Allow Room For Personal Growth
Live and learn. Allow yourself the room to make money mistakes. To have good and bad money saving months.
Slow habit change will win over in the end. Making small changes like, paying yourself first, negotiating your expenses and auto-investing you start to find saving money easy.
In fact, there are 12 simple money habits that can give you better money habits for life.
This all starts with the move towards more conscious spending and that’s the aspect of ‘budgeting’ I think is more important.
It took me time to implement and grow to a point where I’m saving £800 a month, whilst living a lifestyle that I love. This has ultimately got me on track to retire by 2036.
I no longer feel guilty for spending, or anxious about saving, but this took a good few years. It was also the result of applying the right type of budget for my personal psychology.
Final Tips On How To Budget
All of these tips on how to budget are probably more about adjusting your psychology than strict rules.
This is because I believe that smart money systems and behavioural nudges are more impactful than strict financial dieting.
It’s often our own mindset that gets in the way of budgeting that money itself.
Personally, once I had used a budget and spending tracking to build a solid finances foundation, I actually moved more towards a ‘no budget budget’, based entirely on conscious spending.
Find out if your personality suits that style of budget (and learn more about it), or if a different type of budget will work better for you. Take the quiz.
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