How To Stick To A Budget? (10 Tips For Effective Budgeting)

A woman using cash as a way to stick to a budget.

If there is one skill that you must master to succeed in life, it is learning how to stick to a budget and knowing how to spend your money wisely. But it isn’t something that is taught in schools and, there is a good chance your parents weren’t very good at it either.

Budgeting, like everything else, is a learned and acquired skill. You have to become better at it over time. 

One thing that might help speed up that process is to learn from the experiences that others have had in regards to how they were able to stick to a budget.

That’s where we come in to play. 

We’ve compiled 10 tips to help you create a budget, stick to a budget, and use it throughout the rest of your life.

1. Break Your Spending Habits Down Into Major Categories (Keep It Simple)

The easiest way to make sure you stick to your budget is to keep it simple. That means you break things down into major categories, set your limits, and go.

Make sure you’re paying your bills, taking care of your needs, and if possible, saving at least 20% of your money.

Following that simple structure, you are bound to save money and start living within your means without ever having to get into the details of what you spend your money on and where.

2. The Power of Cash (You Always Know How Much You Have Spent)

If you are having a hard time being able to stick to your budget, try using cash instead of a debit or credit card.

Many people have no idea how much money they waste until they start paying for everything with cash.

Furthermore, there is also a psychological mechanism at work here in that you are literally handing over your hard-earned money for something.

You might start questioning what you are buying after a while.

There’s also a physical limitation to this method. If you allow yourself $300 for entertainment expenses and keep that money in cash then, once you run out, you are done.

If you blow it all within the first two weeks of the month, you might reconsider how you spend your time.

Additionally, it might make you consider the price of your entertainment and how much you are willing to spend on your interests.

It’s the little mental roadblocks that keep you from achieving financial goals.

As an individual, you might rarely spend money conscientiously because society has conditioned you not too. However, when possible, using only cash will help you think about what you are spending your money on and whether or not you really need it.

3. Decide On Credit Or Debit But Not Both

The biggest mistake that people make when they try to stick to their budget is that they attempt to use both credit cards and debit cards. This is a huge no-no. Stick with one or the other but never use both.

The reason behind this is because debit cards are the same as cash in a transactional sense. Alternatively, a credit card is a line of credit with a hefty interest rate attached to it if you don’t pay off your debt every month.

One transaction is a one-and-done situation, the other could linger for months.

One of the best ways to look at this problem is to think about your food expenses. This is one area where, if you are not able to diligently and consistently pay off your credit card, you should always use debit and never credit.

For example, if you buy $100 worth of food at a 10% interest rate, you will pay $110 or more for that food over the course of the year if you don’t pay off your balance. Is that worth it? 

Is buying something on sale worth putting it on a credit card if you cannot pay your balance? 

The answer is no.

However, credit cards aren’t always bad. If you pay your balance every month and receive rewards points or cash-back incentives, then a credit card is great because it allows you to keep cash on hand.

4. Limit The Amount Of Fees You Pay On Your Bank Accounts

The accumulation of the fees you pay on the variety of your bank accounts is one of the biggest drains on your hard-earned money. This remains true whether the fees are interest-based or even ATM service fees.

You need to learn how to use ATMs sparingly. Furthermore, figure out how to keep enough cash on hand to cover your needs without having to resort to a $3-$5 fee every single time you need cash.

ATM fees aren’t the only fee you should be wary of, however, as there are many other “hidden” costs to spending money.

Interest rate charges, late charges, and even “service” fees all eat away at your money and prevent you from being able to stick to your budget.

Knowing what costs what in the fullest sense will not only make you a more informed shopper but it might also keep you from spending money.

5. Record Your Spending Habits And Analyze Them

Start writing down what you spend your money on. Do this for each transaction to help you identify where you spend money and allow you to consider whether it was necessary or not.

Generally, it isn’t the larget ticket items like rent and car payments that might throw you off your budget. You know of those pre-set expenses each month and work hard to ensure you have enough money in the bank to cover them.

However, it is the small daily expenses that might creep up on you and prevent you from being able to stick to your budget. Things like buying a $4 coffee every morning, or a going out for lunch with co-workers each day, or bad habits like smoking.

When you are able to see how much money you throw away on temporary things, you might look at it differently in the future.

Try keeping a small notebook or diary of your expenses. Tally how much you spend, where, and then explain why you did it.

The last part forces you to reflect and internalize your reasons behind your spending.

It is much easier to buy and forget about what you bought than it is to record it all down and explain it to yourself. At the end of the day, you are the one person you cannot hide from.

6. Use The Budgeting Tools Your Bank Provides You With

If writing all your expenses down on paper is a bit old school for you, try using an electronic solution. Things like a budgeting tool, there are many of them out there, help you quantify and breakdown your expenses and even suggest ways for you to save and cut back.

Furthermore, many banks have built-in functionalities to their online banking platforms.

Typically these services take the heavy lifting out of creating a budget and allow you to automatically group expenses together such as entertainment, food, living expenses, etc.

This way, you can have a better understanding of what percentage of your earnings are going to the different categories of expenses.

While it is essential to be as involved as possible in understanding your spending habits, sometimes a bit of help from a budgeting tool can be a real lifesaver when it comes to making a plan.

7. Figure Out Your Biggest Expenses

Another way to make sure you are going to stick to your proposed budget is to find out what your biggest expenses are and cutting them or eliminating them.

This is called budgeting without the pain because you just shrink the numbers and magic happens.

Look beyond the expenses that you are required to pay for, such as rent or a mortgage and focus on large expenses that you don’t need.

This method is most effective if you don’t take much time to examine how and why you are spending the money. Find the biggest, non-essential expenses, and work to reduce or eliminate them.

Often, when you begin examining your large expenses, you begin justifying and convincing yourself that they were necessary. As a result, you will spend the same money on a similar expense next time.

It is important to reflect on your spending habits, so you can recognize where you can improve. However, don’t get caught up in convincing yourself that certain expenses were essential when they were not.

Following this method will have you living within your means in no time.

8. Shop For Your Needs, Not Your Wants

Determining the difference between a need and a want will help you optimize your spending habits most effectively and allow you to stick to your budget.

For example, you need to pay your rent because you need shelter. But you don’t need to go out to dinner. You need to buy food to eat, but you don’t necessarily need a filet mignon.

If you have been following a similar routine for an extended period, it may be hard for you to differentiate between a need and a want.

With everything that involves spending money, take the time to plan. Going to a grocery store, clothing store, or a home hardware store without a plan will result in your leaving with products you don’t need.

A plan keeps you on track while you are working to accomplish a goal, and they are especially useful when you feel like you may be deviating from what you initially set out to achieve. Your finances should be no different.

By making a plan, you can focus on shopping for your needs and not get distracted by your wants.

9. Schedule Your Bill Payments

There are two goals here: (1) to make sure you pay your bills on time and, (2) that you avoid any fees.

The ancillary benefit is that you know how much you are spending at the beginning of the month, every month. This means that you are prepared for bills and not simply taking the bills as they come. The latter can create a significant amount of chaos.

You should have some idea of how much money you will have to spend at the beginning of the month. This is because you know most of your major bills ahead of time.

Try to schedule bill payments one week prior to their due date. This ensures that they are paid on time but that you also get somewhat of a grace period if something unexpected happens.

If you worry about self-discipline and have a tendency to spend money during that time, then pay your bills as soon as you are able to.

Once you have paid your bills for the month, then you can possibly treat yourself, as long as you have put aside some kind of savings.

10. Approach Your Budget With Optimism And Positivity

Maintaining a positive attitude while budgeting and planning your financial future isn’t easy.

However, you have to stay as positive as possible throughout the process. As well as to not to be too hard on yourself when you fall short.

Don’t use shortcomings as an excuse to abandon the plan. Realize that creating a budget and being able to stick to it is not an easy process. Furthermore, it takes time to change your mindset and begin to look at your expenses as something that you have control over.

If you find yourself wavering in your financial goals, imagine the positive benefits of achieving your goals.

What are you saving for? How will sticking to your budget reduce your stress at the beginning of each month?

Anything in life worth having takes time and effort, stick to your budget and be consistent with your hard work, the results will come.

The realization that there are 86,400 seconds each day. What are you doing today, so that tomorrow you are a step closer to where you want to be? If not now, then when?

eightysixfourhundred, make them count

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Hi, I'm James! I want to help you make the most of your day by providing helpful tips and informative articles on motivation, time management, productivity, and happiness.

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