1. Budgeting Basics: Introduction
  2. What Is Budgeting?
  3. Setting Up a Budget
  4. Simple Steps to Using Your Budget
  5. Budgeting: General Tips
  6. Establishing Budget Goals
  7. Budgeting Mistakes to Avoid
  8. 10 Things to Remember About Budgeting

When you’re getting used to budgeting for the first time, knowing these budgeting tips will help you manage and stay within your budget.

Be Flexible

If you want to spend more on groceries one month because you’re having a party or craving something gourmet, there’s nothing wrong with that. Just spend less in another area to compensate. Don’t expect to always stick within the exact guidelines you set when you first created your budget.

Reward Yourself

Maybe your budget is so tight that the most fun you can afford are the ingredients to make some chocolate chip cookies or a one-night DVD rental, but at least allow yourself that. Or maybe you’re in a better situation financially and the choice is between saving 15% for retirement one month or buying a concert ticket and still saving 14%. You should reward yourself occasionally for your hard work. If you don’t reward yourself, it will be emotionally difficult to stick to your budget in the long run.  

Check Lifestyle Inflation

For most people, lifestyle tends to inflate when income goes up. As you earn more, you might move to a nicer, more expensive place; start driving a nicer, more expensive car; and start taking more frequent or more expensive vacations. Some amount of rewarding yourself is okay; after all, if you reward yourself the same way on a $7.50 an hour wage or a $75,000 a year salary, yes, you might be able to save more and retire sooner, but where’s the short-term incentive to work harder, and what if you never reach retirement?

Some lifestyle inflation is okay, but you should be aware of this tendency and make sure the choices you’re making to spend more are intentional and not just a result of doing what people around you are doing. When you get a raise, it’s okay to spend a little more, but save a little more, too. Having more money means having more options in life, so the less you allow lifestyle inflation to creep in, the more choices you’ll have, whether the choice you want to make is to retire early, walk out on a terrible job, take a sabbatical or buy a new couch. (Learn more in How to Manage Lifestyle Inflation.)

Always Keep Your Spending Below Your Income

You may not be able to do this every month, or even every year, but it should be what you do most months and most years. For example, your expenses might exceed your income in December when you buy Christmas gifts, but that’s not a problem if you’ve saved extra from January through November to account for your higher December spending. And you might have high medical bills one year that force you to dip into savings, but that’s okay if you’re adding to your savings in years when you’re healthy.

Remember how we said that budgeting isn’t about deprivation, it’s about putting your money to its highest and best purpose according to your personal values and goals? One of your new budgeting goals might be to reduce your spending in a particular category so you can put that money toward something that is a higher priority for you. In the next three chapters, we’ll give you some specific budgeting tips for each spending category.


Establishing Budget Goals
Related Articles
  1. Personal Finance

    Why It’s Essential to Create a Budget for Yourself

    Budgeting may sound elementary, but it is the cornerstone of sound fiscal management.
  2. Personal Finance

    Here's How to Create a Successful Budget

    Break your expenses into needs, wants, and savings goals for a budget plan you can stick to.
  3. Personal Finance

    5 Reasons Why You Can't Stick To Your Budget

    You want to stay on track with your finances, but these fatal budgeting flaws may be holding you back.
  4. Personal Finance

    Advanced Budget-Cutting Strategies

    Once you've mastered basic budgeting, it's time to dig deeper into how you can use your budget to meet your goals.
  5. Personal Finance

    4 Easy Techniques for Budgeting Money

    Budgeting money is critical for everyone, but to be successful at creating and sticking to a plan, it’s helpful to have some tricks up your sleeve.
  6. Personal Finance

    6 Reasons Why You NEED a Budget

    By now, you're probably sick of hearing the b word. Too bad. This is just of those financial lessons that cannot be preached enough.
  7. Personal Finance

    How To Stay On Track With Your Budget

    Sticking to a budget and making savings is the only way to put yourself on a firm financial footing.
  8. Retirement

    5 Signs You're Spending Too Much in Retirement

    You're finally retired – free to have all the adventures you've dreamed of. Just be sure you have a budget and watch for these 5 signs you're overspending.
Frequently Asked Questions
  1. Does the S&P 500 index include dividends?

    Learn about dividend payments and the S&P 500, as well as how the yield has trended lower over time due to changes in ...
  2. What are the best ways for a company to improve its net margin?

    Learn about what businesses can do to increase their net margin, including ways to increase sales revenue and decrease operational ...
  3. What is the difference between a 401(a) and a 401(k)?

    Learn about 401(k) plans and 401(a) plans, and discover the key differences between these two types of retirement plans, ...
  4. What's the difference between a 401(k) and a Roth IRA?

    A 401(k) and a Roth IRA differ primarily on tax treatment, investment options, employer involvement, and limitations on contributions ...
Trading Center