7 Budgeting Tips to Help You Save More Money

Whatever your goals, achieving them usually starts with a plan. Whatever your financial goals – education, retirement, homebuying, a car, vacation – the best way to plan for them usually is to make a monthly budget.  

Your budget is a plan to end each month a little closer to your goals – and perhaps a little more financially secure, too. According to a U.S. Federal Reserve survey, more than 25% of adults were one $400 financial setback away from being unable to pay their bills – and we all know that unforeseen circumstances can happen.¹ If following a budget helps you handle an unexpected setback, you’re likely to sleep better. And if the setback never comes, you’ll be that much further along toward your education, homebuying, or vacation – everybody could use a vacation! – goal.

Experts recommend starting by figuring out what you’re earning and spending now. For each of the past few months, what money came in – through jobs, gig economy work, and other sources? Pay attention to variances in income. Some you can predict: Maybe you have a seasonal job that brings in regular income for a few months of the year. Others may or may not be predictable: For example, you may not know whether you’ll receive a holiday bonus. If unsure, it’s a good idea to err on the side of slightly underestimating income and overestimating expenses.

It’s typically harder to track spending than income, since you usually get income in only one or a few ways but you spend in many different ways. You could try the “zero-based budgeting” technique, in which you assign a specific “job” to every dollar of income you anticipate in a month – including savings – leaving nothing unaccounted for. Another way to track spending more easily is to join the growing ranks of people who pay by credit card, debit card, or other electronic means, all of which is more readily tracked. The Fed reports that credit and debit card use has grown from 51% of all monthly transactions in 2018 to 55% in 2020, while cash shrank from 26% to 19% of monthly transactions.² Using cards can help make it easier to track expenses and might help you build points or rebate value from your card provider.

Another favorite expert recommendation is to “pay yourself first.” This means prioritizing how much money you want to move into a savings account every month, which you can do once you’ve tracked your income and expenses and assigned jobs to every dollar. And once you know how much you can afford to pay yourself, you can automate the money transfer so you don’t have to remember. If you do that, then it becomes a greater effort not to save than to save. 

When you do your expense tracking, you may find small expenditures adding up to more than you realized. For years, the classic example was daily visits to the coffee shop, but nowadays it might be delivery meals or streaming services that you don’t really use much anymore. Would a smart thermostat – and a few gradual temperature adjustments – help you cut excess heat or air conditioning costs? Is your smartphone on the most cost-effective data plan, or are you getting extra-usage charges every month? Are data-hungry media, social, and photo backup apps set to Wi-Fi only?

Often, major expenses come with additional expenses trailing quickly behind, and many people forget to take those into account. But it’s important to think about the big picture when it comes to bigger purchases. For example, if you’re buying a car, consider the total cost of ownership – from gas mileage to repair and insurance costs. If you’re buying a house, you’ll also want to account for property taxes, home insurance, maintenance, landscaping – you get the idea. Potential new homeowners can read more in “Budgeting Tips for New Homeowners.” 

And don’t forget: Big expenses aren’t necessarily only about consumption. Sometimes they can be an investment. It’s also a good idea to look at the bigger picture when planning for expenses that’ll return dividends, such as education that earns certificates or credentials that might get you a raise.

If you put in the work to track income and expenses, spend some time at the end of the month to see how it all worked out. Were there financial missteps you might want to take a different approach with next month? Does your budget need to be tweaked upward in one category and cut elsewhere to compensate? What’s changed since you prepared your budget? What looks like it might change soon – and how should your budget change in anticipation?