A newly-married couple goes over their budget on a spreadsheet on a laptop.

How to Stick to a Budget

Updated September 4, 2018 . AmFam Team

Setting a budget is the first step in getting control of your family’s finances. We’ve put together a top-notch list of budgeting tips to help you save and make the most of your hard-earned money.

To make the most of your hard-earned money, you can’t turn a blind eye to your spending habits — knowing where your money goes, determining which expenses are necessary and adjusting your spending can save you money.

We’ve gathered some helpful tips to consider when getting back on the road to financial freedom.

Why is it Important to Have a Budget?

Even if you have the fortune of having an actual fortune, setting a budget is a must. So why is it so important to have a budget? For starters, creating a budget is one of the best ways to get your finances under control – and keep them that way!

What Does it Mean to Follow a Budget?

So you’ve taken the first step to controlling your finances by setting a budget. The next step is a crucial one, as now it’s time to consistently follow your budget. Following a budget is an important habit to form because this is how you’ll be able to put away enough money to secure your family’s future, as well as your own retirement. Here are some tips to help ensure your budget is followed consistently.

  • Eliminate “impulse buys” – especially on big ticket items. There is no better way to blow a budget than to go rogue and purchase something on a whim. The best way to stave off that itchy spending finger is to take some time to really think if that item is a “want” or an actual “need.”
  • Never spend more than you have. This sounds obvious, but this is also where credit cards can come in and burst open your budget balloon. Remember, a credit card is NOT your money. It’s an advance that will have to be repaid. In other words, when you bust out the plastic, you’re spending money you don’t really have.
  • Plan your meals. One great tip about grocery shopping is to never go into the store hungry. Why? Simple — you’ll be thinking with your stomach and will buy too much stuff you don’t need. This is when a meal plan can really save you some money. If you know what you’re going to be eating, Then you’ll know how much money to bring when you go shopping.
  • Eliminate needless fees. How’s the APR rate on that credit card of yours? Even if you have an excellent one, that’s still an additional fee, and one that few people account for. Eliminate this one by using cash whenever you can.
  • Consider generic prescriptions. For some of us, it’s always allergy season, and those antihistamines can really put a dent in your budget. Instead of getting brand name OTCs, why not switch to the generic version? The active ingredients are the same, and you can save some serious money.

How to Keep a Budget on Track

Keeping your budget on track takes a keen eye for detail. You’ll need to meticulously monitor your digital accounts and online expenditures. The reason for this is not just to ensure your wallet hasn’t been compromised, it’s also to assure that you have enough extra cash flow to cover an unexpected expenditure here and there. Here are some other tips to keep you and your budget on the right side of the ledger.

  • Categorize your expenses. Ever heard of the 50/30/20 rule of budgeting? It dictates that each month, you set aside 50% of your income for needs, 30% for wants, and 20% for savings and debt repayment. Simplifying your expenditures with three simple categories makes the entire budgeting process more manageable and less overwhelming.
  • Consider a budget-tracking app. Budget tracking apps go together with the digital wallet experience. Find one that you can use with ease and stick with it.
  • Take the time to gauge where your money is going. In other words, for the first few months, track your progress. Are you consistently on point, or are there some unnecessary expenditures that creep in?
  • Automate your savings. Take 20% of your monthly earnings and set up an automatic transfer to your savings account. This way you don’t have to fret over if you’re saving enough each month.

Evaluate Your Current Spending Habits

You can’t turn the page on your old financial habits if you don’t acknowledge, analyze, and figure out how to improve them, so face the music and grab your most recent bank statement.

Find outliers. Are there some big, out-of-the-ordinary expenditures on your statement? If they’re medical bills or necessary home improvements (say your air conditioner needed to be replaced in the middle of July), that’s understandable. But multiple expensive restaurant or online shopping purchases are cause for concern. Take note and work to curb those big expenses.

Identify the repetitive small charges. Even though that $2 small coffee seems like a cheap way to get your mind in gear for the workday, it adds up quickly. So does that mid-morning bagel and afternoon energy drink. Many of these mini expenses tend to be food- or drink-related, so consider brewing your own coffee and bringing food from home to satisfy your cravings.

Calculate the carry-over. If you’re spending your entire paycheck every two weeks, you’re treading water and failing to set yourself up for future financial success. If you’re not taking some of your earnings and putting them into a savings account every pay period, you should at least see your checking account increase in value over the course of a few paychecks.

Set Short- and Long-term Financial Goals

Saving money and obtaining good financial health is a heck of a lot easier when you’re working towards specific, attainable goals. Keep these tips in mind whether you want to pay off your credit cards in six months or plan on taking your family on a tropical vacation for the holidays.

Be realistic. Your thousands of dollars in student loan debt aren’t going to just disappear in three months — you’ve got other expenses to care of, after all — so set a realistic timeframe for accomplishing your long-term goals.

Differentiate your needs from your wants. Saving up for a new sportscar sounds like a lot more fun than paying for a new furnace, but when it comes to keeping your family safe and in sound financial health, the choice between the two is obvious. When setting goals, make sure to identify whether the goal is a need or a want and consider your current status when choosing which to save for.

Prioritize your goals. After differentiating your needs from your wants, prioritize the goals you settled on. You can save to pay off your credit cards and take your family on that vacation at the same time, sure, but ranking your goals in terms of importance can make a big difference should you have a savings hiccup halfway through the process.

Track your progress. Whipping your finances into shape and accomplishing financial goals isn’t a set-it-and-forget-it kind of project — it takes a lot of tracking and adjusting. Noticing that you’re off track in week one is much better than noticing it in week nine, so carefully monitor your bank account or utilize an online money management and budget-tracking service.

Many services let you connect your bank accounts, credit cards, bills and investment accounts to paint a clear picture of your finances in one convenient place, making it easier than ever to create a budget and stick to it.

Make it Personal and Have Fun

Tracking your spending and cutting back on spending can seem like a chore, but it’s all in the name of making your family’s life better. Try utilizing some of these tips into the way you budget to save money and have a little fun at the same time.

Give yourself some wiggle room. Budgeting doesn’t mean cutting every single coffee, movie and take-out order from your life. Set a limit for the amount you can spend on those things, and plan out a particular time when you can splurge a little on a special purchase. Try out some of these tips for creating a monthly budget.

Reward yourself. While you’re tracking your progress towards your short or long-term financial goals, set checkpoints for your progress and reward yourself when you reach them. What’s the fun in budgeting if you can’t celebrate your successes?

Make it a family activity. Facing off with your family to see who can meet their goals or save the most every month can spur some seriously competitive savings! If you have young children, you’ll also be setting them up to practice good money habits later in life. And who wouldn’t be careful about spending their allowance when the prize is ice cream? Just remember that it may take some time to get used to budgeting, but so long as you’re diligent about sticking to your budget, it’ll pay off — literally!

Insure What You’ve Earned with American Family Insurance

When you’re saving your hard-earned money, get in touch with your American Family Insurance agent to make sure your insurance policies will be there to back you up in the event of the unexpected. Happy budgeting!

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

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