How to set a realistic budget you can live with

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If you’re struggling to manage your money, you’re not alone. A GOBankingRate survey found that 40% of Americans have less than $ 300 in savings. This makes it difficult to manage emergencies. Budgeting can help.

Day 1 of Living Richer: Top 3 Expert Tips on Budgeting
Read: What it means to live a truly rich life and how to achieve it

There are many ways to budget that suits your needs, especially if this is your first time. Check out this guide to get you started.

What are the benefits of budgeting?

Budgeting doesn’t mean breaking down and never drinking latte again. As for how budgeting helps, this means:

  • You know how much money is coming in and how much is going out. Based on your priorities, you decide how much you want to spend on flexible spending.

  • You have a roadmap for your short and long term financial goals. After budgeting for living expenses, you find money for other purposes, like saving and pay off the debt.

  • You understand what your income and expenses are. You avoid arriving after a month and wondering what happened to your money.

To find: 17 Biggest Budgeting Mistakes You Make

Types of budgeting methods

When it comes to how to approach budgeting, there is an option for everyone. Here are some popular methods:

  • 50/30/20: Developed by Senator Elizabeth Warren, this budgeting method allocates 50% of your income to your needs, 30% to your desires and 20% to building up savings and repaying your debts.

  • Zero-based budgeting: With zero-based budgeting, you distribute all your income so that your income minus your expenses is zero. Every dollar that comes in has a function.

  • Envelope method: Popularized by Dave Ramsey, this method uses cash in envelopes to control spending. Each expense category has an envelope, and once the money is gone, you stop spending.

  • Flexible budgeting: With a flexible budget, you reallocate your income and expenses as they change. This allows more flexibility, but it takes more time to manage.

  • Static budgeting: As the name suggests, a static budget stays the same even if your income increases.

  • 80/20: You focus on setting aside 20% of your income for savings. Everything else comes from the remaining 80%.

How to create a budget



Budgeting and forecasting isn’t always easy, but knowing where to start can help. These step-by-step instructions on how to create a budget will get you started:

Budgeting tips for beginners

The best budget is the one you can stick to. Here are a few tips.

What’s a good budget for you?

You want a realistic budget. You might want to start with a few broad spending categories and narrow them down as you learn your spending habits.

An elaborate budget may not be realistic. It’s good to start slowly and with small goals. Even adding a small amount to savings each week adds up over time.

Choose a budgeting method

The 80/20 budget is a good starting point since its objective is to help you build up your savings. Another newbie-friendly option is the 50/30/20 budget as it helps you focus on what’s important: covering essential expenses, saving money, and paying off debt.

Any budgeting method can work, but it may take a few tries to find the one that’s right for you.

To find: Why you should start budgeting now for 2022

Use budgeting tools and apps

Many banks offer tools to automate recurring payments and analyze your spending. You can also consult the many budgeting apps the low. Check out user reviews and forums to see what works best and what is reliable.

Avoid fads

Financial gurus are constantly offering what seems like new and exciting budgeting advice. While it can be tempting to go with a new method, it’s best to stick with what works for you.

If you’re a long-time user of an app or method, you have an established history that you can use to inform your decisions. If you want to try a new app or method, think about what makes it different from what you’re doing now. Is it really better? Is it user friendly? If so, make the change slowly.

What to consider when setting a budget

Income and expenses may vary from month to month. Preparation is the key to overcoming them while staying on budget. Consider the following factors that could affect your budget.

Irregular income

Budgeting can become a problem for the self-employed and commission workers. It could also come into play with a side activity. Once all of the monthly budget items are covered, that money can be used to pay off debt, needs, or savings more quickly.

Discover: What counts as taxable income?

Irregular spending

These expenses are predictable but infrequent. Property taxes and periodic car maintenance are examples. You can budget the amount for a specific month. Or, if you have less flexibility, a monthly contribution to that possible expense might work better.

Emergency room

These are irregular expenses that you can’t predict, like a hospital visit or storm damage to your home. Created a emergency fund for these items by setting aside a percentage of income or maintaining a fixed amount in your savings account.

How to improve your budgeting process

When it comes to budgeting and to save money, you will find that this is an ongoing process. The best approach is to work on improving your approach regularly. Here are a few ways to do it.

Weekly and monthly follow-up

Each week, connect with other spenders in your household to be on the same page with your income and expenses for the week.

Budgeting and forecasting should take place monthly. Look at the previous month and assess your spending against your budget. One way to do this is to:

  • Make a column for your spending budget

  • Make a column for your actual expenses

  • Determine the percentage you spent in each category

  • Calculate the difference between your budget and your actual expenses

To verify: Do you spend more than the average American on 25 everyday items?

Adjustment and reassessment

Use your monthly follow-up to decide your budget percentages for next month. Look at the categories in which you spent too much money and allocate funds or reduce spending in those categories.

Build a habit

Find out if the method or app you used in the past month worked for you. Check your budget on a regular schedule. Set alarms or calendar appointments to monitor your budget.

Think about budget mistakes, but don’t let them hold you back. Bundle up and keep going so you can hit your financial goals.

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Last updated: September 16, 2021

This article has been updated with additional reports since its original publication.

This article originally appeared on How to set a realistic budget you can live with

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