How to Make and Stay on a Budget

A pen, a calculator, and a financial document

Budget. Does the word make you cringe or break into a cold sweat? We all know we’re supposed to plan our finances around a structured budget, but that’s easier said than done.

Managing your money without a budget is like driving through a new city without directions. You might know your ultimate destination, but you have absolutely no idea how to get there.

If you learn how to make and stay on a budget early in adulthood, you’ll establish a strong foundation for success in the future.

Evaluate Your Finances

Before anything else, you need to evaluate your finances. Try to answer each question below:

  • What is your total monthly income? Calculate your take-home pay after taxes. Include any and all income, whether from a full-time or part-time job, a freelance gig, Social Security check, or any other form of payment.
  • What are your recurring monthly expenses? Consider regular bills like your rent and electricity, groceries, gas, and then add in any “fun” expenses like entertainment and clothing.
  • How much do you want to save? Determine how much of your income you want to send straight to your savings account each month. This amount will gradually build your emergency fund.

Now that you’ve worked out that information, you can organize how you spend and save your money.

Set Realistic Goals

The best budget is smart but realistic. Don’t promise to put 50% of your income into your savings account if you need 70% of your income to cover bills.

Start by allocating the income you need to cover your necessary and unavoidable bills. How much income remains after all of your bills are paid? Let’s say you bring home $3,000 a month. You spend $2,000 of that on rent and bills. What should you do with the other $1,000?

Your budget will tell you. Perhaps you’ll put half of it into savings and use the other half for discretionary items, like visiting friends, eating out, and shopping.

As long as you keep realistic goals, your patterns will remain the same every month. You’ll know what’s coming in, where it’s being spent, and how much to save. That’s financial peace!

Consider Using Budgeting Tools

You don’t have to become a budgeting wizard if it’s too tricky or overwhelming. Many budgeting tools are out there to help you set short- and long-term budget goals. Explore the different programs online to find one that works for you.

Here are a few of the best budgeting tools and apps for the 21st century:

  • Intuit Mint: The “Gold Standard” for budgeting that creates a picture of your spending in real time. This tool is free, which makes it even better (see? You’re budgeting already).
  • You Need a Budget (YNAB): Best for committed users willing to pay an annual fee. This imports your bank transactions and helps you cut unnecessary spending.
  • PocketGuard: A free, simplified system designed to crunch numbers and tell you what’s left “in your pocket” for the day, week, or month.
  • Dave Ramsey’s EveryDollar: These apps, available in both free and premium versions, help you track your spending and also save according to financial guru Ramsey’s financial freedom principles.

Learn From Your Failures and Adjust For the Future

Try as you might, sometimes failure will smack you in the face. Maybe you’ll forget to pay a bill or spend more than you should during a night out. It’s okay!

Your failure is only a failure if you fail to learn from it. How can you avoid making that mistake again? Is there a way to adjust your behavior for the future? In short, how can this make you a better financial planner going forward?

You don’t need to be perfect to have a strong financial future. You just need to be committed to your goals.

Read about micro-investing and how to get started with our complete guide: Micro-Investing: What It Is, Why It’s for You and How to Start.