Budgeting Tips: 10 Budget Commandments & Other Pointers
3:38 PMPosted by: John S Kiernan
Budgeting is a complicated, often frustrating process. But it’s also an area to which a great deal of attention, including in-depth academic research, has been paid. Thus, there are myriad helpful insights to be gleaned from the experiences and study of others, and below we have amassed a collection of the best tips and strategies we could find.
Listed below you will find WalletHub’s 10 Commandments of Better Budgeting as well as more specialized tips for families, students, project budgeters, vacationers and wedding planners.Finally, we tapped a panel of leading money management experts to share their favorite budgeting advice.
The 10 Commandments of Better Budgeting- Have A Clear Objective : Budgeting for budgeting sake won’t get you anywhere. It’s simply not a worthy investment of your time to go through the process without a purpose.
Whether you’re simply seeking improved financial awareness – determining exactly where your money goes each month – or you are interested in limiting spending and shifting around resources for a particular purpose, be it debt reduction, vacation planning or wedding preparation – understanding your ultimate objective enables you to customize your budget to your specific needs and, in turn, increases your odds of success.
After all, the impetus for your budgeting will dictate what type of template you’ll want to use, which expenses you’ll track and, perhaps most importantly, the scope of the changes you will need to make to your daily financial management habits.
- Establish Realistic Milestones For Meeting Your Objective: A clear goal will also enable you to choose metrics by which to evaluate your progress. This could be saving a certain amount of money over a particular time period, reducing spending in a particular category or getting out of debt within a 0% credit card’s introductory term. The specifics are up to you, but it’s important to set these sub-goals before starting in earnest so your expectations are not tainted by initial results.
With that being said, creating a budget with rose-colored glasses on is right up there with budgeting for budgeting’s sake in the pantheon of budget blunders. A list of unattainable goals simply won’t do you any good.
That’s why one of the first steps in our site's budgeting process is to track income and expenses for at least a month, noting what each and every dollar is spent on. This will give you initial benchmarks against which to compare future spending and the ability to establish realistic performance milestones.
It will also help you determine how you want to group expenses in your budget as well as the period of time you’ll be budgeting for. We recommend only budgeting for a period of time that you can track with hard data. In other words, you shouldn’t try to budget for the next five years unless you have a large enough sample of actual spending and payment data to support your plans.
- Prioritize An Emergency Fund & Then Debt Repayment: While discretionary expenses like home renovations, a family vacation or a new car might have sparked your interest in making a budget, you’ll have to put those plans on the back burner if you have revolving debt or lack a financial safety net.Despite the high-cost of debt – credit card debt, in particular – it’s important to get your emergency fund started before turning your attention to amounts owed. After all, getting out of debt won’t do you much good if you incur an unaffordable major unexpected expense soon thereafter. So, structure your initial budget around increased monthly savings, with the aim of soon having at least two months’ take-home pay squirreled away.
Then, adjust your budget to make the minimum payments on all of your balances except that with the highest interest rate – to which you will attribute your previous monthly savings contributions and the rest of your allotted monthly debt payments. After you’ve paid off your most expensive balance, you can repeat this process with the next-most-costly until your debt free – at which time you can divert debt payments to savings until you have an emergency fund with at least six-months’ pay.
For more debt repayment strategies, check out our guides on How To Get Out Of Debt and How To Stay Out Of Debt.
- Use Free Cloud-Based Software: While spreadsheet programs such as Microsoft Excel provide advanced analytical potential, most people simply won’t realize the full potential of such programs and should therefore opt for free cloud-based options, like Mint and Wally.
Such applications automatically track expenses for you and make it easy to identify trends. There is little reason to pay for budgeting tools these days, as budgeters have myriad free options at their disposal.
For a breakdown of the leading budgeting software, check out our articles on How To Make A Budget and the Best Free Budget Templates.
- Make Maintenance An Appointment: Updating and/or reviewing your income and expenses should be either a weekly or monthly activity that ultimately becomes second nature. We recommend setting a particular time on a particular date or day of the week to perform budget maintenance. Consistency will make things much easier, as regular updates are more manageable than trying to catch up in bulk – allowing for more direct adjustments as well.
In the early going, it’s probably best to set a number of reminders for yourself – online calendar, phone, sticky note, etc. – so you don’t forget. And consciously make plans around the time you will need for budget upkeep.
- Craft A Social Incentive System: The number of people who make budgets far exceeds the number of folks who stick to and maintain their budgets. Creating an incentive system is one way to retain your interest and promote engagement.
For example, you may want to establish tangible rewards for reaching certain milestones, or simply staying within budget for a particular period of time. The type of incentive that will work best depends on the particular individual, but it could range from treating yourself to an ice-cream sundae to finally taking a long-put-off vacation. Incentive systems are particularly effective with family or group budget projects, as the participants can keep each other honest and excited.
- Plan For Income Fluctuation: Planning for the unexpected is essential as far as personal finances are concerned. That’s why we buy insurance and build emergency funds.
One thing the Great Recession made abundantly clear is the fact that income levels aren’t always going to stay constant, let alone steadily increase. Anyone with a job related to the real estate market or financial industry learned that first hand.
As a result, it’s crucial that one not spend as if they will always be bringing home their current salary (or more) in addition to solidifying their financial safety net through a well-funded emergency account. We also recommend identifying your core expenses – those you absolutely cannot live without – that you can use as a sort of default emergency budget when times are tight.
- Always Account For One-Time Expenses: One-time expenses – such as an expensive car repair or a home appliance that needs replacement – rightfully flummox many budgeters and throw a crimp in their calculated financial management. With this in mind, and given the prevalence of one-time expenses, we recommend creating a budget category specifically for this type of spending. You can then list each one-time expense that crops up as a line item within this category – enabling you to track the total cost of these one-offs as well as exactly what you’re buying.
Furthermore, we also recommend opening a separate bank account (or a separate saving bucket within your current account) targeted to these expenses. By contributing a bit of money to this fund in months that you have no one-time expenses, you will be in a better position to afford those that pop up in the future.
- Leverage & Learn From Analytics: Whether it’s spreadsheet users leveraging analytical functionality (such as Excel formulas) or budgeting app users reviewing the progress reports and recommendations offered by their software, it’s essential that budgeters maximize the value of the process by using it to bring about positive changes in their personal finances.
This may require a bit of homework on your part – in terms of both the technical side of things and your own internalization of the data – but it’s undoubtedly worth it.
- Separate Luxuries & Necessities: We all know that luxuries can quickly become necessities, and we all fall into this trap. It’s important to remember and account for that. Don’t question whether you’re doing it because we all are. Just figure out how you’re doing it, and what you’re spending money on so you can eliminate those expenses if ever necessary. Consider these core expenses your break-glass-in-case-of-emergency budget.
Any budgeter can live by the tenets explained above, budgeting can also be a very specialized process – with various projects unearthing their own set of questions. With that in mind, we built on our overall budget tips with advice catered to some of the most popular budget categories.
- Budgeting Tips For Families
- Student Budget Tips
- Project Budget Tips
- Vacation Budget Tips
- Wedding Budget Tips
- Group Expenses By Family Member: Identifying the individual attached with each expense will add clarity and make it easier to spot wallet leaks. It will also enable you to set personalized goals and incentives.
- Make It A Group Effort: Including your family in the budgeting process will make it easier to orchestrate actual change. It will also help increase your kids’ financial literacy.In addition, group budgeting lends itself to bonding and incentive-based competition. Framing the budget process as a game will certainly help get the kids on board.
- Don’t Forget The Dog (Or Cat): if you have pets, it’s important to remember that they carry their own costs. From food and grooming to medication and pet insurance, you’ll need to incorporate these expenses into your plans.
- Don’t Let Your Budget Kill The Vibe: Your family budget is not the end all and be all. Yes, it’s important but it should be viewed as an ally rather than an enemy or undue burden. So, keep things in perspective and try to have some fun.
- Make It A Contest: Perhaps even more so than families, groups of friends are particularly well-positioned to make use of competition-based budgeting. Adding a competitive angle to costs shared by classmates, teammates, fraternity guys or sorority gals, etc., and the rest will take care of itself. This is especially useful when saving for a trip or big event.
- Can’t Forget Student Loans: While you aren’t required to begin making student loan payments until 6-9 months after graduation, it’s best to begin accounting for your future payments and building up some savings specifically earmarked for this purpose. Beginning to actually make payments while in school will also enable you to save on interest.
- Determine If The Project Will Increase Property Value: If the project you’re planning to undertake involves work on your home, make sure to do some research into how the changes would affect your property value. If the work would actually reduce the value, this is an important cost to take into account.
What’s more, looking into whether otherwise allocating your funds would provide a bigger equity boost. Researching local home values will be helpful in this endeavor.
- Consider All Potential Costs: Project budget templates tend to be far vaguer than standard monthly budgets, or even templates for groups like students and wedding planners. This allows them to work for a wide range of projects, but it also adds to the budgeter’s burden. You’ll have to think up all of the different things you’ll need to buy, trying as best you can to research potential expenses that could creep up on you.
It’s also important to note that building materials can vary widely in cost, often depending on the quantity you buy in. This not indicates that finding cheap materials is one cost constraint strategy, but it also underscores the importance of thorough planning.
- Work Efficiently: If you have to rent a truck or other equipment, or you’ll only have help for a certain period of time, it’s important that you schedule things in a manner than enables you to maximize the amount that you get done. This will likely entail scheduling rentals for overlapping times and/or taking off work one Friday to have a whole long weekend at your disposal.
- Monitor Resources: Keeping track of what you have enables you to determine what you need. The farther in advance that you anticipate these needs, the easier it will be to make cost allocation choices, rather than being forced into doing something.
- Destination & Calendar Date Are Essential: There are numerous ways to take the same type of vacation. For example, a trip to the beach could entail a road trip or an international flight and a European vacation could be done out of either a backpack or a five-star hotel. So, avoid getting hung up on having to go to a particular place at a particular time. Instead, focus on finding ways to get what you want at the cheapest possible price point.
This might, for instance, entail finding a relatively unheralded destination with potential to be a hidden gem. Or, you might want to allocate more of your budget to transportation at the expense of lodging. Traveling outside of peak dates is another simple way to save, but you should be sure to check the weather before booking.
- Make Sure You Have A Credit Card: A credit card is a traveler’s best friend. Not only does a credit card provide a blanket $0 liability guarantee – meaning you’ll never have to pay for unauthorized charges – but it also reduces your susceptibility to pick pockets.
For overseas travel, VISA and MasterCard offer the lowest currency conversion rates available to international travelers, enabling those who use no foreign transaction fee credit cards on those networks to save up to 9% relative to other popular conversion methods. We recommend getting a VISA or MasterCard debit card with low international ATM withdrawal fees as your primary means of accessing cash for the same reason.
Many credit cards also offer lucrative rewards or 0% financing rates that can help you afford a particular trip.
- Check Out Initial Bonuses: In recent years, credit cards have been offering initial rewards bonuses worth hundreds of dollars to new applicants who have excellent credit. An extra $400 could certainly alter the affordability of your trip, or even enable you to upgrade your accommodations. Travel expenses also represent a good way to meet the initial spending requirements required to qualify for an initial bonus, though you must be able to pay off your balance in a timely manner.
To check out the best initial bonuses currently being offered, visit Best Credit Card Deals page.
- Consider A House Instead Of A Hotel: For larger groups, especially those comfortable with a couple of people sleeping on couches, can lock in some significant savings by forgoing hotel rooms in favor of a rented house. Brokers such as VRBO, HomeAway and AirBnB have houses and condos with a range of sleeping capacities available in most major U.S. cities.
- Don’t Go Into Debt For A Vacation: It’s simply not worth indebting yourself for a vacation. Period. There are just too many low-cost, even free, ways to have fun and let off steam to warrant compromising your financial security for a trip.
There is, however, one notable exception to this rule. If you are paying for the trip with a 0% credit card in order to leave would-be payments – money that you do, in fact, have – in secure, accessible investments for longer. With interest rates being so low, allowing funds to reap higher yields for 18-21 months (the longest 0% terms typically available) can make a big difference. Just make absolutely sure that you can pay your tab in full before 0% gives way to high regular rates.
- Take A Staycation: If you simply can’t afford to go somewhere this year, make the best of things with a festive staycation. We have a whole guide on the best staycation destinations and activity ideas.
- Put One Person In Charge: Weddings are classic cases of too many cooks in the kitchen ruining dinner. While input from the bride, the groom and their respective parents should, of course, be taken into account, there needs to be a single individual who has final say. In most cases, this will be a parent of the bride, since they traditionally are the ones footing the bill.
Not designating such a decider could leave you vulnerable to agonizing over every decision and overspending in compromise.
- Avoid Common Budget Busters: One of the biggest ways to save money is to avoid common budget-busters like wedding planners, live bands, top-shelf booze and peak event dates (e.g. Friday, Saturdays and holidays). They all have low-cost alternatives that make relatively little practical difference to event goers.
- Include The Honeymoon: One of the biggest decisions that must be made in the course of wedding planning is how much money to attribute to the reception and the honeymoon, respectively. You basically have to decide if you’d rather celebrate with friends and family or in private.
Make sure to check out our report on the Best Budget Honeymoon Destinations for some money-saving ideas.
- Don’t Count On Gifts: You will, of course, get gifts from those who attend your wedding. You should not, however, count on the cash you may receive to help pay for the cost of your wedding. For one thing, you don’t know how much you’ll get. And, besides, gifts should be gifts – the icing on the proverbial cake, not the batter.
- Make A Gift Card Wish List: Opting for a gift card wish list rather than a traditional registry gives you a great deal of flexibility, as you’ll be identifying your favorite stores rather than particular items.
This enables you to pool gift cards from the same retailer to buy big-ticket items that would be inappropriate on a standard registry. It also positions you to more easily liquidate your gifts if you would rather have cash.
- Sell Your Gift Cards For Cash: Gift cards easily be sold on secondary markets such as the ones mentioned here. You can then, in turn, buy discounted gift cards from a particular retailer in order to pool your funds or make a purchase for which a gift card cannot be used.
- Use Digital Invitations: Wedding stationary costs an average of $188, according to the Bridal Association of America, and that figure doesn’t even include printing invitations and reply cards. Handling the invite, RSVP and thank you process via email or social media would thus save you a lot of money.
It all comes down to your priorities and how traditional you and your family are.
- Steer Clear Of Fridays & Saturdays: Much like traveling during the offseason, scheduling your wedding for a low-traffic day of the week will save you a considerable amount of money, on everything from the reception space and caterer to the DJ and limo.
For more money-saving wedding tips, check out the Budget Wedding Guide at Brides.com as well as our Money-Saving Tips For Wedding Season.
Ask The Experts: The Best Budget Tip I’ve Ever ReceivedBudget experts are people too, which means that in addition to studying money management professionally, they have to budget on a personal basis as well. With that depth of experience in mind, we asked these budget professionals to share the best budgeting advice they’ve ever received as well as a range of other insights on the budgeting process.
You can check out their bios and responses to the following questions below.
- What’s the best budget tip you’ve ever received?
- What advice do you have for budget problem solving?
- What is the biggest budgeting mistake people make?
Arwiphawee Srithongrung Associate Professor in the Hugo Wall School of Urban and Public Affairs at Wichita State University
Scott Rothbort Term Professor in the Department of Finance at Seton Hall University
Phil Uhlmann Senior Lecturer in Finance at Bentley University
William J. Trainor Jr. Professor of Finance in the Department of Economics and Finance at East Tennessee State University
Kristy L. Archuleta Associate Professor of Personal Financial Planning in the School of Family Studies and Human Services at Kansas State University
Rachel Bi Assistant Professor of Personal Financial Planning in the Woodbury Business School at Utah Valley University
What’s the best budget tip you’ve ever received? I teach public budgeting and finance and both are the same. For personal budgeting, I would say having a realistic plan and follow the plan for the entire budget period, i.e., monthly or weekly budget. First and foremost, the good plan is the plan that balances between revenue and expenditure. If we earn more, we can have more needs and wants; if we earn less, we must limit our needs and wants to correspond with what we make. Last, the good plan is the plan that prioritizes your needs and wants to balance budget. Unless you are multimillionaire, we all have to prioritize our needs and wants based on our personal values. For example, I love nice purse and clothes; I limit my budget each month and set aside for those until 3-4 months that I can buy one (no credit card on this, of course). But I won’t spend on anything in the same category, e.g., high-end cosmetics or a nice pair of shoes on the same budget period simply because I prioritize them. You do need to reward yourself on something like that in addition to mandatory/necessary for basic living so that you won’t be suppressed and splurged out later on. For public budgeting, it’s exactly the same as personal budgeting: balance revenue and expenditure and prioritize programs based on citizen values. What advice do you have for budget problem solving? Self-discipline is the most important. The second most important is knowing economic and psychological values of goods and products you purchased. For example, a good college may not always mean the one that has relatively high tuition cost; but it may mean the one that asks for relatively cheaper tuition, like a public university. And for both college products, the economic value is the knowledge you obtain to pursue career, while the psychological value may be the networking or the reputation of the university, or even college football team reputation. You need to know you pay for psychological or economic values. Last but not least, maintain your revenue at the stable and sufficient level, relative to your needs, wants and life style. This also mean trying to safeguard your future revenue by preparing emergency or buying life or long-term care insurance, should there be any needs to take care of yourself when you can’t earn revenue. In fact, budgeting is about making revenue first and then deciding spending later. What is the biggest budgeting mistake people make? Based on my observations, they failed to prioritize their needs and wants; and hence, they failed to balance their budget. Another thing that I think people and kids need to be taught since they were young is that they have to know the economic and psychological values of the goods and products. This means they should have self-awareness; why they pay for this and that and what are the value they will get out of them. Scott Rothbort Term Professor in the Department of Finance at Seton Hall University 
What’s the best budget tip you’ve ever received? It is better to have too much tax taken out of paychecks rather than too little. What advice do you have for budget problem solving? Get rid of bad habits - coffee drinking is an expensive time wasting addiction. Ditto for smoking. Cut expenses at the margin. It is cheaper to buy a movie for $19.99, order in a pizza and make popcorn at home then to go to the movies and dinner, especially for a family. Find a way to save for the future - take advantage of employer savings programs, especially those that have tax deferral aspect to them. What is the biggest budgeting mistake people make? Not understanding the full consequence of owning a large / major asset such as a car or home. It is not just the debt service payment. There is insurance, maintenance, etc. that most people don't figure into the equation. That being said, if you can afford to own a home do so. Renting is just paying someone else's mortgage and builds no equity in your life. Phil Uhlmann Senior Lecturer in Finance at Bentley University 
What’s the best budget tip you’ve ever received? Keep your mortgage debt to 75% of cost of the home and make sure that the payments - principal, interest and taxes do not exceed 30% of your family income. I know this is very conservative but it will keep you out of trouble. What advice do you have for budget problem solving? Stop going out for meals, don't use your credit cards and save something, anything, every month no matter what. What is the biggest budgeting mistake people make? Some people let their credit cards run up, don't pay them off every month. Of course, the issuers count on this but it's not good practice. William J. Trainor Jr. Professor of Finance in the Department of Economics and Finance at East Tennessee State University 
What’s the best budget tip you’ve ever received? I've always liked what an old financial planner told me once. "The person who makes $25,000 and spends $24,000 will always be infinitely happier than the person who makes $100,000 and spends $105,000" aka don't spend more than you make. What advice do you have for budget problem solving? The greatest force in the universe may be inertia, which is especially true in all financial manners. Do not wait to tackle problems. Bills don't go away; they just get bigger if not addressed. What is the biggest budgeting mistake people make? Underestimating what something is going to cost, whether a car, home, cell phone or otherwise. Upkeep, insurance, hidden fees, etc. can easily add 20% or more to the cost. Anything with a monthly fee can wreck a budget, whether it's cable, cell phone, Netflix, HBO, on-line games, etc. Consider the yearly cost, not just the monthly payment. Kristy L. Archuleta Associate Professor of Personal Financial Planning in the School of Family Studies and Human Services at Kansas State University 
What’s the best budget tip you’ve ever received? Set financial goals so you have a reason to budget and know what income (after any taxes and benefits) you actually have coming in and know how much and where the money is going. What advice do you have for budget problem solving? Budget problem-solving is typically about changing one's money behavior. In other words, people have to make changes about what they do. It is easy to advise someone to spend less, however people tend to do better when they come up with ideas that are doable for themselves. Sometimes, budget problem-solving can seem overwhelming. However, doing small things one at a time, like taking lunch to work, not purchasing a latte, or using a phone app to start tracking where your money is going, can make a big difference. These small changes will be different for people depending on lifestyle, needs, etc. When a person does one small thing and is successful, they are more likely to make another small change. These small changes can add up to make a big difference and create more sustainable solutions for their budget issues. What is the biggest budgeting mistake people make? My first reaction to this question is that the biggest mistake people make is that they don't take the time to budget and if in a couple situation, they don't communicate with each other about money at all. This is a huge mistake! But, in the case, you were hoping for actual budget mistakes, I would say it is underestimating how much people are actually spending. This may sound simplistic, but it can lead to big problems. If people don't track all of their variable expenses, then it is easy to not really know what a person spends month-to-month. Too often, people don't make a budget until they get into trouble. People often have the same reaction to the word budget as they do to the word diet. As a result, they may treat a budget like a diet and only "budget" when they must. Once they are in better shape, then they go off of the budget. Rachel Bi Assistant Professor of Personal Financial Planning in the Woodbury Business School at Utah Valley University 
What’s the best budget tip you’ve ever received? Clearly communicate with everyone involved in the budget plan. Use technology (e.g., specialized software, mobile apps, and websites) to help you track your spending activities! What advice do you have for budget problem solving? List out all of your financial goals and prioritize them. Separate the fixed expenses from the variable expenses. Set up an emergency fund and savings for unexpected events. You can be flexible with variable expenses, but you need to set up a cap from overspending. Revise your budget plan in time since it is an ongoing process. What is the biggest budgeting mistake people make?
- Failing to separate fixed expenses from variable expenses;
- Underestimating or failing to set up a cap on variable expenses;
- Failing to communicate clearly with everyone involved in the budget plan;
- Failing to stick with the plan (a commitment device may be needed).
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