The most important budget you will write is one that you keep to—that you stick with through thick and thin. You can write out the Very Bestest Budget Ever (patent pending) but if you don’t let it guide your spending, you might as well just keep scrolling through Facebook or looking at snaps for the 10 minutes it takes to write it.
In a nutshell, here’s how budgets work:
- You write it down
- You keep track of where you’re spending money
- You spend as much as you’ve allotted in each zone
- You keep your financial goals (see here for more about writing goals)
The key to a useful budget is actually in tracking your spending. If you actively keep track of where your money is going, you are in control of your money. Keeping track of where the money is going is where and when you decide whether or not you’re going to stick to your budget.
So with that in mind, here are the 4 keys to writing a budget that you actually keep.
Key 1: Write your budget where you will use it
For most of us, that mysterious “somewhere” is your phone. Now you can be cheap (like me) and just keep tabs in Notes, or you can use handy-dandy apps like Mint.
Writing your budget on your phone ensures that every time you make a purchase, you can track it. And if you track every purchase, and categorize it immediately, then you know exactly where you are financially.
HINT! This also helps if you use a credit or debit card. Since you probably don’t use a checkbook and keep track of every time you take money out of your bank, keeping a budget on your phone means that you will be able to catch fraudulent purchases when you do check your bank statements.
Now if you’re still using a dumb phone and can’t keep track of your purchases on the fly, you can still keep track of all of your purchases. Just start saving 100% of your receipts, and at the end of each day (week, month, whatever), track where your spending is in relation to your budget.
Key 2: Budget out EVERYTHING that you want to spend money on
Do you regularly go to concerts? How many times a month on average do you order pizza? Have you been wanting a tattoo?
Write it in your budget.
Put the big stuff first (rent, food, car payments, gas, insurance, emergency fund, tithe, yadayada) and then add in ALL of the other things you are willing to spend money on.
You can organize this however you want, but putting fun money into your budget will help you make sure that you actually stay on track and don’t lose your sanity.
Why would you keep a budget that doesn’t reflect the fact that you’re a person who does stuff for fun? You wouldn’t. So put the fun stuff in.
Here’s how I organize my budget:
- Emergency fund
- Toys (esp. musical instruments)
I’m pretty vague with how I organize my budget because I really don’t spend much outside of my categories. Every once in a while I’ll put a clothing fund in my “Life” category and go create a new wardrobe, which is great, because I can afford it since I’m not spending it on stuff like rent or food.
I also count eating out as a part of my “Food” category. It’s just a thing I do to help me spend less eating out—because it’s super expensive and I need to eat for the whole month.
Key 3: Budget for the time that you have money for
Do your paychecks come in every two weeks?
Then budget for every two weeks.
I’ve been living on scholarships for the past 4 years, and those come every semester, so when I get my money, I budget all of it for the whole semester.
Now you can totally budget for the money you don’t have, but I have found that I stick to my budget and keep my money in better condition when I stick with budgeting money that I actually have … mostly so I never spend money I don’t have).
If you budget for the money that you have, then you can’t go into debt. Unless you decide to have money by taking out a loan (which is reasonable when you’re buying a house, car, or going to school). This is the point of a budget!
Key 4: Write your budget conservatively
You have an absolute amount of money. Yes, you can take out loans from the bank, the credit card company, or your parents, but that defeats the purpose of a writing a budget.
So here’s the conservatism: give yourself wiggle-room. Writing a budget that you will keep means creating space in the numbers for you to be as lax or tight as you want with your dollars.
Yes, you budgeted out money for a concert and 20 meals at a restaurant in a month. Estimate that you’ll pay more than you may actually pay, so when you only pay $200 when you budgeted $500, you have $300 to play with. And if things cost more than you actually thought, you still have the money to do it!
Another way to create wiggle-room is to always round up. When filling your tank costs $22.57, you could track that you spent $22.57, OR you could track that you spent $23. If you track $23, then you just gave yourself $0.43 of wiggle room.
At the end of 6 months, I’ve ended up having an extra $20-50 to play with by rounding up. Apps like Acorns can help you make use of those spare pennies for your future, or you can literally save them in jars and cash them out at your bank (my personal preference).
So, how do I write a budget I’ll keep?
- Budgeting is only useful if you are keeping track of your money
- Write out your budget where you will use it
- Budget out EVERYTHING that you want to spend money on
- Budget for the time that you have money for
- Write your budget conservatively
What do you think? Do you write out budgets? What kinds of categories do you put into your budgets to save your bank and your sanity? Share in the comments!