How To Budget and Stay Debt Free— 13 Practical Tips

How To Budget and Stay Debt Free— 13 Practical Tips

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It’s kind of scary when you don’t know where to start.

And I’m not talking about making a lasagna either.

I’m talking about creating and maintaining a successful budget.

It’s no wonder most of us simply float through the month and hope the paycheck will cover all the expenses we’ve made throughout.

But it’s not exactly the best way to go about it.

A good budget allows you more financial freedom because there are clear boundaries on what you can and can’t invest in as well as where you’ll be six months or six years from now.

To help get your finances together, here are 13 simple tips to perfect your budget.

Setting the money stage

We all know the general rule of living below your means. And it’s a good guideline to start with.

If your standard of living is constantly growing along with how much you make it’s a recipe for disastrous debt in the near future. Your payments and liabilities will just get bigger.

If your budgeting mindset is wrong you might as well ask for the 30k in debt now because, in the end, it isn’t about how much you make, but your money mindset.

Allow for unexpected expenses

Sometimes we wind our budgets too tight and we don’t leave room for unexpected expenses.

Adding an extra $20 – $30 (or even more) expense added to our budget projections can help you make sure you don’t end up short by the end of the month.

Add a little wiggle room to your projections.

Pay this person first

Yourself.

But by this I don’t mean go out to eat and buy some Merlot (though that would be nice).

I mean take your designated savings chunk off the top first.

That way you’ll know the amount you have to work with is fair game for all other expenses right off the bat.

If you leave savings as the last part of your budget you’ll find yourself saving less and less.

Have a maximum grocery allowance set in stone

Having a grocery allowance set in stone also helps you not overspend with food.

Being able to say you have $140 to spend on groceries for the week is better than saying you have about $150 bucks…that’s just a recipe for automatically overspending on food.

Giving yourself a grocery spending limit will help you get creative with what groceries you buy and save money without going overboard.

Automate savings this way

Saving when you don’t even have to think about it is the best.

There are plenty of apps out there that help you do that, like Clink.

For example, right now I’m hooked on Chime, an online bank with a series of nice money-saving perks. Here are a few:

  • No ATM or transfer fees
  • Automatically rounds up after every purchase and moves amount to your savings
  • You get your paycheck up to two days early

The automated savings perks are definitely the round-up feature, and that you can also automate a percentage of each check to go your savings.

You can sign up for Chime here and get an initial $25 (while funds last) after you set up direct deposit.

Automatic savings are serious finance savers.

Keep all receipts

If you’re left wondering at the end of the month where all your money went you’ll have your receipts handy to know the answer.

Keeping your receipts makes you accountable, and helps you see where you can cut spending even further.

Which leads me to my next point.

Don’t let historical debt repeat itself

If your pile of receipts is getting bigger and bigger month after month then Houston we have a problem.

One of the reasons to have a budget is to gradually get better with your money, not worse, or not to spend over your limit.

Don’t let bad past purchases happen often, or ever.

Shop smarter not harder

Make sure you squeeze all the juice out of shopping, whether online or with your receipt.

For instance—

With Ibotta, you can take a picture of your receipt and get cashback on eligible items.

With Ebates, the all-time favorite, you can shop online and get a percentage cash back from your purchases.

If you’re shopping and paying for things you need anyway, why not take advantage of cash backs or ways that you can get them for cheaper?

Groceries also apply here (it’s often where I end up spending too much money).

To help you save on groceries, I wrote a massive post on 27 ways to cut your grocery bill in half you should check out.

In the end, shopping smarter and not harder adds up.

Constantly nurture it and readjust

Think of your budget as a living breathing being, just like you.

It constantly needs attention and readjustment as it grows or shrinks. It’s always a good idea to designate a day during the week or month to revisit it and see if you’re on track.

That way you make sure you’re hitting your marks and making all the necessary adjustments while accurately tracking your spending.

Your budget won’t be the exact same 4 months down the road, so readjusting always works best for you.

Create a physical general expense calendar

This one helps me visualize expenses in a clear and concise way.

Sometimes it’s hard to visualize all the expenses you need to plan for in your head.

So a good thing to do is to create a calendar which each month, and the big expenses that will show up for that month.

For example, at the end of the year, you might need to take into account property tax payments, or you need to schedule routine car maintenance check-ups every three months. Or even take into account your tax returns and if you’re on track.

These big expenses can be kept track of on a calendar you can whip out when you budget.

That way when you’re doing your budgeting (I prefer paper and pencil) you can see what extra expenses you need to add in for that month.

Makes sense?

Prioritize debt and savings after basic expenses

Think of it in a tiered way. First comes basic expenses, then comes debt repayment, and then comes savings.

All the other extra stuff can be accounted for after that, assuming there is any leftover cash.

Having an order of importance is, well, important. Prioritization will keep your finances on track and making sure you are staying out of debt.

This makes sense if you have a load of debt to pay. If not, you can always go back to paying yourself first and prioritizing your savings.

Here is a visual:

Out of sight out of mind accounts

A great way to keep from impulse spending or dipping your fingers into your savings when you really don’t have to is to open a completely separate savings account.

I mentioned Chime earlier as a great way to build up your savings with online banking because of it’s savings features.

Out of sight accounts mean you’ll remember them as spending options less often.

It also means you’ll have to go through more hurdles to access your savings stash, which will help in detracting you from spending. Genius.

The 50/20/30 rule to keep it all together

A while ago I came across a good rule of thumb that I think is a great general way to make sure you are being financially savvy. The 50/20/30 rule simply means—

50% of your income goes essentials/needs

20% goes to savings

30% goes to personal needs

It helps to make sure your budget isn’t out of whack and the bulk of the money is going where it should be.

Wrap It Up

Budgeting is fun! Well, maybe not quite like that.

But being smart on how you go about it can make it less of a hassle.

One thing’s for sure though, budgeting should be to your life as water is to a beta fish, you can’t thrive without it.

And it can definitely help in lowering the stress factor and being happier.

Any budgeting hacks I missed? Don’t mind if you share them below.