Budgeting Hacks

The Ultimate Guide to Budgeting (Links & Resources)

Budgeting is an important aspect of personal finance and money management. It involves planning and tracking your income and expenses to ensure that you are spending within your means and achieving your financial goals. 

In this article, we’ll provide some budgeting tips and techniques to help you get started.

  1. Start with a Budget Plan

The first step in budgeting is to create a budget plan. This involves listing all of your income sources and expenses, and then allocating your income to cover your expenses

As you create your budget plan, it’s important to keep in mind some common budget goals that people strive for. If you don’t have any goals yet, you may take inspiration from the ones mentioned blow:

  1. Paying off debt: One of the most important budget goals is to pay off debt. This could include credit card debt, student loans, or other types of debt. By allocating more money towards your debt payments, you can pay off your debts faster and save money on interest in the long run.

For interest rates higher than 8-9%, you can also explore debt consolidation options. One option is to refinance with a First Lien HELOC and use your equity to consolidate debt to a lower APR. 

This can help you save money on interest and pay off your debt faster. 

However, it’s important to carefully consider the terms and conditions of any debt consolidation option and make sure it fits your financial goals and budget plan.

  1. Building an emergency fund: Another important budget goal is to build an emergency fund. This is a savings account that you can use to cover unexpected expenses, such as car repairs, medical bills, or job loss. 

Dave Ramsey has a widely recognized recommendation that suggests you have a $1000 emergency savings budget set aside for any incident. 

By allocating money towards your emergency fund each month, you can build up a safety net that can help you avoid going into debt when unexpected expenses arise.

  1. Saving for retirement: It’s never too early (or too late) to start saving for retirement. By allocating money towards retirement savings each month, you can build up a nest egg that can help support you in your golden years. 

Here are some common retirement savings and investment vehicles to consider:

  • 401k: A 401k is an employer-sponsored retirement plan that allows you to contribute pre-tax income towards your retirement savings. Many employers will also match a portion of your contributions, which can help to boost your savings even more.
  • Roth IRA: A Roth IRA is an individual retirement account that allows you to contribute after-tax income towards your retirement savings. The money in a Roth IRA grows tax-free, and withdrawals in retirement are also tax-free.
  • Traditional IRA: A traditional IRA is an individual retirement account that allows you to contribute pre-tax income towards your retirement savings. The money in a traditional IRA grows tax-deferred, but you will owe taxes on withdrawals in retirement.
  • 403b: A 403b is similar to a 401k, but it is available to employees of non-profit organizations, schools, and government agencies.
  • Pension plans: Some employers still offer pension plans, which provide a guaranteed retirement income based on your years of service and salary.

No matter which retirement savings vehicle you choose, it’s important to start saving as early as possible to take advantage of the power of compound interest. Aim to contribute at least 10% of your income towards retirement savings, and increase your contributions as your income grows. By making retirement savings a priority, you can ensure a comfortable retirement in your golden years.

  1. Saving for a down payment on a house: If you’re planning on buying a house, it’s important to start saving for a down payment as early as possible. 

By allocating money towards your down payment fund each month, you can build up the cash you need to make a down payment and achieve your dream of homeownership.

Most loans require a 20% down payment under an 80/20 Loan to Value. However, some First Lien HELOC banking partners offer a 90/10 Loan to Value, meaning that you only need to save for a 10% down payment and it doesn’t require PMI. 

Keep in mind that there are other common savings options you can use to save for a down payment, such as:

  • High-yield savings accounts
  • Money market accounts
  • Certificates of deposit (CDs)
  • Mutual funds
  • Exchange-traded funds (ETFs)
  • Individual retirement accounts (IRAs)

Researching and choosing the best savings option for your specific financial situation can help you to save more efficiently towards your down payment goal.

Although goals may differ, having a goal is the very first step to starting your budgeting journey. 

So be sure to have your budget goal clearly stated in a piece of paper or whatever record keeping devices you have, so that you have a clear direction of where you’re headed.

  1. Track Your Expenses

Once you have created your budget plan, it’s important to track your expenses. This will help you to identify areas where you are overspending and where you can cut back. You can track your expenses using a budget spreadsheet, budget app, or even a simple pen and paper. Make sure to categorize your expenses so that you can see where your money is going.

But if pen and paper isn’t your style, we have listed the 3 of the most used budget apps today!

  • EveryDollar: made by Ramsey Solutions, the app can be used by anyone for FREE! You can get started by clicking HERE.
  • YNAB (You Need A Budget): although having a $99 subscription per year, YNAB claims to have helped beginner budgeters to save more than $6000 in their first year. And luckily, they offer a 34-day FREE TRIAL!
  • Mint: with 25 million users, Mint has become one of the most popular budgeting apps today. It gives you the ability to schedule bills, monitor your investments, and many more! And did we mention that it’s FREE?

Go ahead and indulge in these budgeting apps! And remember, choose the one that’s right for you! 

  1. Stick to Your Budget

Sticking to your budget is essential if you want to achieve your financial goals. This means living within your means and avoiding unnecessary expenses. It can be helpful to set up a budget tracking system to help you stay on track. You can use budgeting tools like budgeting apps or budgeting software to help you with this.

  1. Use Budgeting Techniques

There are many budgeting techniques that you can use to help you manage your money more effectively. Some popular techniques include the envelope system, the 50/30/20 rule, and zero-based budgeting. These techniques can help you to allocate your income to cover your expenses and achieve your financial goals.

Envelope System

The envelope system is a simple yet effective budgeting technique that involves labeling envelopes with specific expense categories, such as groceries or entertainment, and allocating a certain amount of cash to each envelope based on your budget plan. 

This helps you avoid overspending by limiting your expenses to the cash available in each envelope. 

The technique has been around for decades and is often attributed to financial guru Dave Ramsey. You can easily customize it to fit your specific budget needs. Learn more about the envelope system here!

50/30/20 Rule

The 50/30/20 rule suggests allocating 50% of your income towards needs, 30% towards wants, and 20% towards savings and debt repayment. 

It’s a popular budgeting guideline that prioritizes spending and helps you achieve your financial goals. 

Senator Elizabeth Warren popularized this method in her book “All Your Worth: The Ultimate Lifetime Money Plan,” and it’s been widely adopted by financial experts. 

Learn more about the 50/30/20 rule and how to apply it to your budget from NerdWallet.

Zero-Based Budgeting

Zero-Based Budgeting is a budgeting technique that involves allocating every dollar of your income towards a specific expense or financial goal. 

You start by listing all of your expenses and then allocate your income to cover each expense, starting with the most important ones first. This ensures that every dollar is accounted for and allocated towards a specific purpose. 

Peter Pyhrr, an accounting consultant, introduced this concept in the 1970s. It’s commonly used by businesses but can also be applied to personal finance. 

To learn more about zero-based budgeting and how to implement it in your budget, check out this guide from The Balance.

By using these budgeting techniques, you can customize your budget plan to fit your specific needs and financial goals. They help you to prioritize your spending and ensure that you are making the most of your income. 

So, take the time to learn more about these techniques and see which ones work best for you.

  1. Plan for Unexpected Expenses

It’s important to plan for unexpected expenses when you are creating your budget plan. This means setting aside some money each month for emergencies or unexpected expenses. 

Some Unexpected Expenses that you might want to consider:

  • Car Repairs
  • Medical emergencies or unexpected health care expenses
  • Home repairs or maintenance
  • Job loss or reduction in income
  • Travel expenses for emergencies or unexpected events
  • Pet-related expenses such as vet bills or emergency care
  • Unexpected taxes or legal fees
  • Home or car insurance deductibles

It’s important to have a plan in place for these types of expenses so that you’re not caught off guard and don’t have to rely on credit cards or other forms of debt to cover them. 

By following these budgeting tips and techniques, you can take control of your finances and achieve your financial goals. Remember, budgeting is a process and it takes time to get it right. 

Be patient and stick with it, and you’ll be on your way to financial success.

Ready to get started with budgeting? 

It can seem overwhelming at first, but the key is to find a method that works for you and stick with it. 

To help you out, we’ve created a free budgeting template on Google Sheets that you can use to track your expenses and stay on top of your finances. 

You can access it HERE.

Don’t worry, it’s completely customizable so you can adjust it to fit your specific needs. 

Happy budgeting!