Building a Budget You Can Stick to with Strategies That Work

Sticking to a budget is often harder than creating one. Many people start the year with the best intentions, carefully mapping out their income and expenses, only to abandon their budget a few weeks or months later. In many cases, it isn’t because of a lack of discipline. 

Rather, it’s because the budgeting strategies they chose didn’t fit their lifestyle or financial goals. 

To help, we’ve enlisted the expertise of Juan Rosales, Community Banker here at Amplify Credit Union. Throughout our guide, Rosales shares practical budgeting strategies and tips to help you build a budget that you can actually stick to.

6 Tips to Keep in Mind When Budgeting

Budgeting is more than just picking a method. It’s also about adopting the right mindset and habits. Before diving into the nitty-gritty of budgeting, here are six tips to keep in mind.

1. Think of your budget as a plan, not a punishment.

Go into the budgeting process with a positive attitude!

“A lot of people associate budgeting with restrictions,” Rosales says. “However, many quickly learn that a budget actually gives them permission to spend money on the things they want. For example, buying a special treat that is within your budget takes away a lot of the guilt that can otherwise come with that sort of purchase.”

This simple shift in perspective can greatly improve the chances that your budget will stick.

2. Always keep your goals in mind.

Budgeting helps you work towards reaching your financial goals. But in order to reach them, you have to make them first! Some common goals that people set when budgeting include:

• Eliminating debt
• Building an emergency fund
• Saving for major expenses like education, home, vehicle, or large vacation
• Saving for a life event like a wedding, baby, or retirement

Whatever your goals, revisit them regularly. Keeping the why in mind can help you stay on track.

3. Be realistic to set yourself up for success.

It’s easy to set strict spending guidelines when you first start budgeting. However, setting unrealistic goals is an easy way to get discouraged and off-track.

Rosales reminds people to be honest with themselves. “If you know that you probably won’t cut out a certain category of spending cold-turkey, don’t set yourself up for failure,” he says. “It’s better to slowly change your habits than to expect something unrealistic of yourself. 

For example, eating out may be an expense that you want to cut back on. Cutting out the expense altogether may seem like the fastest way to reach your goal, but it may not be realistic. Instead, focus on cutting back a little at a time.

4. Expect your budget to evolve.

Your budget may look completely different a year, or even a few months, from now. A new job, a move, rising expenses, or a growing family can all change the way you manage your money. It’s a good idea to check in with your budget regularly and make adjustments as your financial situation evolves.

5. Don’t let a bad month derail your efforts.

“More than likely, there are going to be months where you fall off your budget,” Rosales advises. “It’s important to dust yourself off and try again next month. Don’t give up.” 

Just remember: One bad month doesn’t erase the progress you’ve already made. 

6. Don’t be afraid to try different methods.

There’s no rule that says you have to stick with the first budgeting strategy you try. If one method isn’t working for you, experiment with another approach. You can even combine elements of strategies and create a unique system that fits your lifestyle. Rosales says that the best budgeting method is rarely the most popular. Instead, it’s the one that fits your lifestyle. 

Core of Budgeting Strategies

When it comes down to it, budgeting is all about organizing your personal finances in a way that helps you reach your financial goals. 

“There are several different types of budgeting strategies,” Rosales explains. “But almost all of them start in the same place: taking a look at your income and your expenses, then comparing the two.”

• List monthly income: If your income is in the form of a regular paycheck where taxes are automatically deducted, you can use your net income or take-home pay amount. If you are self-employed, or if you have additional sources of income, such as child support or social security, you should include these as well.
• List fixed expenses: Fixed expenses are the predictable bills that are roughly the same each month. Expenses that fall into this category include rent or mortgage payments and insurance, student loans, car loans and insurance, and personal loans.
• List variable expenses: Variable expenses fluctuate from month to month. Some bills, like heating and cooling, can change from month to month if you live in a seasonal climate. Other variable expenses include gas, groceries, personal hygiene products, and household items. Take the average of these expenses and choose a number that will cover them most of the time.

Once you have these laid out, you’ll cover the final step: comparing your income and expenses. 

If your income is higher than your expenses, you’re off to a good start. You can put this extra money towards your financial goals, like buying a home or paying off debt. If your expenses are more than your income, you’re overspending and will need to cut back expenses.

Common Budgeting Strategies

After you get a general sense of your income and expenses, you can begin to build a plan. 

According to Rosales, there’s no one right way to build a budget. “The budgeting method you choose comes down to your goals and personal preferences,” he says. “Don’t be afraid to switch methods if one isn’t working out for you.”

50/30/20 Budget

This is one of the easiest budgets to stick to. With this approach, 50% of your income goes to needs like rent, food, utilities, and minimum payments on loans. 30% goes to wants like shopping, subscriptions, or entertainment. 20% goes to your savings account. 

Start with these percentages, and if you need to adjust—adjust! This is just a guideline, and it can be changed to work for you.

Zero-based Budget

This approach involves making income minus expenses equal to zero. In other words, all of your income is put to use somewhere! 

Each dollar is assigned a “job”. A specific amount goes to savings, and other amounts are assigned to different categories. You can repeat these categories every month or switch it up depending on what you need. This budget is recommended for beginners, or for those in debt. 

For instance, if you are under budget in a certain category, this method would use the excess to start building an emergency fund. After your emergency fund is established, you would funnel any excess money toward paying off debt. The key concept here: every dollar needs to be put to work for you.

Envelope Method

The envelope method is a budgeting strategy that helps you control spending by assigning a set amount of money to specific expense categories each month. 

Traditionally, this is done with actual envelopes labeled with categories like groceries, dining out, or entertainment. Once an envelope is empty, you stop spending in that category until you fill it again next budgeting period. Today, many people use digital budgeting apps that replicate this system without needing literal envelopes or cash. 

This method can be especially helpful for someone looking to curb overspending or rein in spending on “wants”. 

Build a Budget that Works for You

There’s no such thing as the perfect budgeting strategy, and the goal isn’t to find the “right” one on your first try. Rather, it’s to build a system and good habits that fit your life, support your goals, and is realistic enough to stick with over time.

Rosales leaves us with the reminder that above all, consistency matters. 

“The people who have the most success with budgeting are the ones who stay consistent,” he says. “Even if your budget changes over time, sticking with the habit of planning your money month after month can have a huge impact on your financial future.”

This article was first published on June 21, 2021.