Budget Tips and Tricks
Manage your money more easily and successfully by incorporating these methods into your budgeting.
A budget is a great road map for your financial life… but it’s only a document. It takes a lot of action on your part to make that plan a reality. Fortunately, I have learned some great budget tips, tricks and hacks that can help.
Once you’ve put together a good monthly budget for yourself and your family — either on paper or on a computer spreadsheet — you can use some of these methods and programs to put your plan into action. Here are four budget tips to get you started.
1. The envelope method
A lot of budget items, like housing, utilities and tithes, are fixed expenses. The amounts stay the same from month to month. They’re easy to plan for and pay. But some other expenses, like clothing, groceries and dining out, can vary widely from week to week or month to month. And if you have a tendency to buy things on impulse, you might find it difficult to stick to your budget in these areas.
Once the envelope runs out of money, you know you can’t spend any more until the next month.
Enter the envelope method. This system uses cash to control your spending in some of those less-predictable categories. Each month, you withdraw cash for all of those problem categories in your budget. Then label some envelopes with the names of each category — “Clothes,” “Groceries,” “Eating Out,” etc. The cash for that month’s budget for each category goes into corresponding envelope. This gives you a tactile, easy-to-grasp measurement of exactly how much money you have left to spend in that category each month. Once the envelope runs out of money, you know you can’t spend any more until the next month.
Dave Ramsey, the king of budget tips, made the envelope method famous. But you can use any kind of container you want — a jar, a box, a can, etc. If impulse buys or credit-card spending are challenging for you, the envelope method will help you stay out of trouble and build some discipline.
2. The set-side account
Some of your life expenses are paid less frequently than others. Things like car registration fees, insurance premiums and Christmas gifts come around only once or twice a year. You should always plan for these future needs in your budget. But you don’t need to leave that money sitting in your main checking account.
If you forget you’ve been saving that money for something, you might be tempted to spend it on something else.
If you allocate money for these expenses in your budget each month, those funds will eventually build up until it’s time to pay them. But if you leave that money accumulating in your main checking account, it will artificially inflate your balance. This can make it seem like you have more spare money than you actually do. And if you forget you’ve been saving that money for something, you might be tempted to spend it on something else. So instead, try using a set-aside account to store money for these annual or irregular expenses.
A set-aside account is a simple savings account linked to your checking account. In your budget, you can group all of your set-aside items together, and calculate a total of those set-aside expenses for each month. Then take that amount of money each month and move it over to the set-aside account. When those bills come due, you can pull the money right out of the set-aside account. And you don’t have to worry about accidentally spending that money on something else.
3. Automatic transfers
The age of technology we live in has given us some great conveniences, and you should take advantage of them. Many people get paid via direct deposit and make their rent, mortgage or utility payments electronically as well.
Automatic transfers can help make budget more successful, too. You should set up as many monthly bills as you can on automatic payment. This will save you time and remove the temptation to spend money in your checking account on other things. Next, set up an automatic transfer to take your set-aside money over to the savings account each month. This saves you from forgetting to make the transfer manually.
You can also use automatic transfers to help you discipline yourself in saving money or paying down debt. If you set the process when you’re in a clear state of mind, you’ll face less temptation to cheat on your budget later on.
If you set the process when you’re in a clear state of mind, you’ll face less temptation to cheat on your budget later on.
One thing I have found helpful is to create a secondary budget, or sub-budget, to keep track of certain items in my family’ master budget. For example, we treat clothing as an annual expense — Laura and I allot ourselves a certain amount of money to spend on clothing throughout the year. So we’ve created a second tab in our master budget spreadsheet where we keep track of how much we have spent on clothing. That helps us stay on top of our records, and we don’t have to remember how much we’ve already spent as we plan our clothing purchases.
You can use a sub-budget for any item that you want to watch closely. We use sub-budgets to track clothing spending, vacation and travel spending, and our set-aside account. This helps us manage expenses that have a tendency to get out of control.
Those are my top four budget tips for making my family more successful with less work. What hacks have you learned for making your budget work for you?