Financial health supports our overall well-being, because being on top of our finances can reduce stress and anxiety. However, money management, especially budgeting, can seem overwhelming. Solution? Seek expert advice! Below are insights from top financial thought leaders. Follow links at the end for even more tips.
First, a definition: A budget is an estimate of income and expenditure for a set period of time. It’s essential for keeping your spending in check and helps you save for the future.
- Practice values-based spending
“Evaluate what really matters to you in your budget,” advises Tori Dunlap, founder of the financial education company, Her First $100K. Dunlap promotes what she calls “values-based spending,” which helps to ensure “you’re neither depriving yourself of life’s small joys nor overspending on [stuff] you don’t care about.” The method involves choosing three categories where you want your nonessential, aka “fun money,” to go.
- Start with your savings rate
G. Brian Davis, a real estate investor and personal finance writer, points out, “Your savings rate—the gap between what you earn and what you spend—determines your wealth and financial success.” Because of this, Davis recommends setting your savings goal first, and aiming for at least 10% of your net (after-tax) income. The higher your savings rate is, the faster you can create passive income and retire early if you wish.
- Leverage technology and automation
“Budgeting apps today are more robust than ever and automatically do the work for you, streamlining the budgeting process,” says financial planner David S. Chang. This is one of the secrets to better budgeting, he says, as it addresses the psychological hurdle of resistance to number crunching. Explore various options; search for "best budgeting apps," and test a few to find your fit.
- Do the budget together
Bestselling author and financial expert Rachel Cruze advises having a financial accountability partner. If you’re single, enlist a friend to cheer you on and help you stick to your goals. If married, have a family budgeting night once a month. “Make it fun!” Cruze advises. “Grab some snacks and put on a good playlist. Set goals together and dream about what the future will look like.”
- Always be monitoring and adjusting
Tiffany “The Budgetnista” Aliche, reminds people that a budget is fluid and dynamic, not set in stone. Her advice: “Check each month to see where you’re overspending or where you can cut down on bills. If it’s not working for you, try something else.” For example, if an unexpected vet bill turns up in your monthly review, consider earmarking savings or discretionary funds for such expenses.
- Prepare for pitfalls
Budgeting demands emotional effort, especially for beginners, and even more so after setbacks. Ben Barlowe, Education Content Writer for YNAB (You need a Budget), advises staying the course. “The only way to break those old, worn patterns of behavior is to do something different over and over and over again. And the more you do it, the easier it will get. Keep your long-term goals in mind.”
Learn more
Building Your First Budget – Her First $100K
7 Practical Budgeting Tips to Help Manage Your Money – Nerdwallet
How to Make a Personal Budget – Money Crashers
15 Practical Budgeting Tips – Ramsey Solutions
Budget 101: How Should A Beginner Budget? – Budgetnista