You don’t have to call it a budget. Many financial experts refer to budgets as a “savings and spending plan” or “cash-flow management” to focus on being in control of your spending.
Pick a method that’s right for you. Some people prefer the discipline of a detailed spending plan that tracks every penny, while others do better with a looser approach, where funds are set aside for their savings and major expenditures and smaller expenses are not itemized.
Budgeting is for everyone. Budgeting is important regardless of your income level.
Spend less than you earn. Your future financial security is based on this premise.
Track spending. Even if you prefer a less structured approach to budgeting, it’s necessary to track all of your spending closely for at least several months to get an idea of where your dollars are going.
Spend from sub-accounts. Financial experts often recommend setting up savings sub-accounts, such as the vacation account, the car account, the education account, the retirement account. With a single large account, it’s far easier to blow money.
Automate. Have as many of your fixed expenses, such as mortgage and car loans, paid automatically from your checking account.
Look for signs. Regardless of how detailed or broad you are with your spending plan, there’s a simple way to gauge whether it’s working: are you increasing savings and decreasing debt at a good pace—or are you dipping into savings and investment accounts to meet cash-flow needs?
Periodically Review Your Budget. Like all aspects of your financial life, you need to check in with your spending plan now and then to see if it’s still accomplishing what you need for your circumstances. Perhaps you’ve experienced major changes in your life that require refining or revamping your spending plan.
Cheat. It’s OK to occasionally “fall of the wagon” by overspending in a category without ruining your budget or feeling like a failure. The important thing is to get right back on track.