“I’ll start a budget … next month.”
If only I had a penny for anytime someone uttered those words.
Then the next month rolls around and that plan to start budgeting is long forgotten. Or you budget for a couple of days and one random shopping trip throws everything off. Or you earnestly want to create a budget on the first of the month, but it just seems like so much work.
Well, you can quit putting it off. Budgeting does take work, but it’s not impossible. Before the next month rolls around, take a week to prepare your finances following this seven-day guide. Then you can kick-start your budgeting journey with ease.
Sunday: Review Your Past Spending
Before you set limits on what you can buy, you need to be realistic about how much you typically spend.
Kumiko Love, founder of The Budget Mom, said when she started budgeting, she’d set her spending limit for food at $300 a month when in reality, she was regularly spending about $700. That set her up for failure.
Take some time Sunday to go through bank and credit card statements from the past few months to see where your money has been going. The more months you review, the better picture you’ll have. Use that to find how much you spend on average in each budgeting category.
Reviewing your spending will show you where you can make obvious cuts, like that gym membership that you haven’t used in almost a year but are still paying for.
Browsing your financial statements can also help you identify problem areas. Are you making too many Amazon orders or Target runs? Does your spending at restaurants double what you spend on groceries?
Monday: Track Your Daily Spending
Another practice that helps you realize your spending habits is to keep track of your day-to-day spending.
Holly Peterson, financial consultant and owner of Elite Retirement Strategies, said tracking your spending is a good first step for people who are wary about limiting their spending with a budget.
“If you want to do it old-school, get a notebook and write down everything you spend money on during the day,” she said. “If that isn’t your style, download a budgeting app that hooks up to your credit card and bank account.”
Regularly recording your spending may make you think twice about things — just like tracking your calories makes you think twice about eating a 500-calorie slice of chocolate cake.
When you track your daily spending, you can get more insight than just looking at old bank statements. For instance, a bank statement might tell you that you spent $30 at the gas station — but it won’t inform you that $10 of those dollars went to buying snacks and coffee, not gas.
Tuesday: Set Your Bills to Auto Pay
When it comes to budgeting, you gotta think about priorities — and your bills are at the top.
Automating payments helps you ensure you pay your bills on time and don’t get hit with late fees. Sometimes your service providers might even offer a discount if you enroll in auto-pay.
This step isn’t hard. It just takes a little time to identify all your monthly bills and set up automatic payments to make bill paying easier in the future.
Wednesday: Develop a Savings Strategy
Your budget isn’t just a plan for your spending. Saving money is important too.
Take this day to think about your savings goals so you can incorporate them into your budget.
One good way to meet your goals is to set up sinking funds. A sinking fund breaks a large upcoming expense — like a vacation — into smaller chunks, and you save up over time.
Some budgeters prefer to have multiple savings accounts for different goals, while others stash their cash in one account and just keep note of how much they have saved toward each individual goal.
If saving money is a high priority, you can choose to pay yourself first by either automating savings when you get paid or manually transferring money to a savings account before you pay bills or do any other spending.
And if you want your savings to grow — don’t we all? — a high-yield savings account is a better place to park your money than a regular savings account that earns less than 1% interest.
Thursday: Think About Upcoming Expenses
It’s tough to stick to a budget if you aren’t basing that budget on what’s coming up in the month ahead. It’s not just bills and recurring expenses like groceries and gas that you have to think about. Your budget needs to include what you’ll spend for any upcoming appointments, events, holidays or special occasions.
“People think budgeting is just really paying your bills, making extra debt payments and saving, but … it’s those life events that set us back on our journeys, because we’re not prepared financially to pay for them,” said Love, of The Budget Mom.
Take this day to think about when and how much you’ll spend in the upcoming month. Sure, there’ll be days when your spending isn’t planned. That’s why it’s important to always have an emergency fund and to include room for fun or miscellaneous spending.
Friday: Find a Budgeting Method You Like
There’s no one way to budget. In fact, here are several to read up on:
The 50/30/20 method bases your spending on percentages. You spend 50% of your money on essentials, 30% on fun stuff and 20% on meeting financial goals.
With the zero-based budget, you plan out where every dollar goes. When you take your income and subtract all spending and savings allocations for the month, the goal is to hit zero.
With the cash envelope system, your variable spending is restricted to the amount of cash you stuff in an envelope to cover each spending category.
The 60% solution is similar to the 50/30/20 method, except 60% of your spending goes to expenses that you’re committed to and the other 40% can be used for savings and discretionary spending.
A bare-bones budget is pretty restrictive. You cover only essential expenses, and any money leftover goes to savings. Here’s an example of how one woman used a bare bones budget to pay off student loan debt.
Paycheck budgeting is when you create a separate budget for each time you get paid rather than budgeting for the whole month.
A calendar budget involves writing out your paydays, expenses and savings transfers directly on your calendar rather than using a spreadsheet or app.
The half-payment method is when you set half the cost of an upcoming bill aside in advance so when it’s time to pay the bill, you only need to come up with the remaining half rather than the total amount.
You can budget with a bullet journal to visually display where your money is going.
Not every budgeting style may work for you. If you try one method and it isn’t working, scrap it and start over with another one.
You may even prefer to use a combination of different budgeting methods, like Love did. After numerous failed attempts at managing her money, she combined aspects of three budgeting methods to create her custom budget-by-paycheck method.
You might also consider using an app that takes some of the legwork out of budgeting. Here are a few of the best budgeting apps we’ve found.
Saturday: Connect with an Accountability Partner
All the work you’ve done this week has set you up to begin budgeting. This step, however, will help you stick to it.
An accountability partner is someone who will hold you to your goal to stay on budget. This person will encourage you to stick to your plan when you really want to buy those shoes you don’t need or go out to eat for the third time that week.
Tia Chambers, founder of Financially Fit and Fab, said cutting back on eating out was one of the hardest things for her when she was trying to save money to pay down debt. She connected with a co-worker who helped her stay accountable and not buy lunch every day.
Your accountability partner could be someone you’re close to — or someone who shares a similar personal finance goal. The Penny Hoarder Community is full of money-minded individuals. Get connected with the community today!
Nicole Dow is a senior writer at The Penny Hoarder.