Most of us at least try to set a budget. Even if we aren’t regular budgeters, we usually have some kind of limits in mind when we buy things like groceries, pay bills, or go car shopping. But what if you’ve tried all the budgeting methods and can’t seem to stick to them? What if you’re horrible at math, or just can’t keep your money organized? Here are some budgeting tips for beginners or those who just can’t stand the process.
1. The Zero-Based Budget
A zero-based budget is one that allocates all income into a spending category, leaving nothing leftover. This is a good start for beginners or those who’ve had trouble budgeting in the past (because they tend to overspend, knowing they have a “cushion”).
2. Pay Yourself First
When you do your zero-based budget, one of your “spending” categories should be saving. Move that money into your savings account as soon as you get paid. Think of it as paying any other bill, except you’re paying yourself. If your bank doesn’t have much in the way of online banking, opening an online savings account can make it super easy.
3. Create Categories
When you’re first creating a budget, what kind of categories should you use? Renown financial and debt-elimination expert Dave Ramsey suggests these categories and the percentages of your income they should take: giving/charity (0-10%), saving (5-15%), housing (25-35%), utilities (5-10%), food (5-15%), transportation (5-15%), clothing (2-7%), health/medical (5-10%) personal (5-10%), recreation/entertainment (5-10%), and debt (0%). Few of us can spend 0% paying off debts, which would mean we are debt-free (aside from housing or mortgage payment). But Ramsey’s plan is to help you get there. You can probably guess what expenses lie in each category, but here is some additional guidance.
3. Go Month-by-Month
You can’t set a budget once and use it every month from here on out. Utility bills will vary with the season. So might your charitable giving. You might have 3 birthday gifts to buy in a month. So at the beginning of the month, examine your expenses and budget accordingly. Some amounts will be constant, but others will fluctuate. Heading to a broadway show this month? Make sure you build that into your entertainment budget. The main thing is be realistic, so you’re forming a budget that sets limits, but is also doable for you. It may take a few months for you to make the adjustment.
4. Carry Cash
If you find yourself swiping your credit card and going over your budget for certain categories, start using cash only for those trouble spots (such as groceries, entertainment, and clothing). At the beginning of the month, withdraw the cash you’re going to need and keep it in a safe place. Only take cash with you when you’re going to need it: like a trip to the grocery store. Using cash is the best way to avoid overspending on an easy swipe of the card. You’ll see the money being handed over, and you’ll know exactly where it went.