If you want to better your financial situation, one of the first and best things you should do is look for ways to improve your budget.
But how, exactly, do you do that?
In this guide, we’ll provide 7 tried-and-true tips to squeeze your budget for everything it’s worth.
1. Be Specific
When it comes to personal finance, I am a firm believer that specificity leads to success.
For example, in order to improve your budget, you need to be very specific about your goals.
What exactly do you want to accomplish?
Do you want to save money for a down payment on a house? Do you want to get out of debt? Do you want to build up a 6-month emergency fund?
Ok then, how much do you need to save for each of your goals? How many months are you planning to take in order to achieve your goals? And what expenses are you going to limit in order to ensure you accomplish what you set out to accomplish?
In addition to setting specific goals, you should create a specific plan for every dollar of your income. In other words, don’t just create a 50/30/20 budget and rely on your in-the-moment decision-making to achieve your financial goals.
The more spending decisions you make at the beginning of the month (when you’re creating your budget) the less likely you will be to make an unwise impulse purchase.
Plain and simple, if you want to improve your budget, you need to be specific.
2. Simplify, Simplify, Simplify
Between creating your budget, logging your daily expenses, holding yourself accountable, and tracking your progress toward your financial goals, budgeting can become quite a pain in the rear.
So, whenever you possibly can, look for ways to simplify your financial life.
To be clear, this has nothing to do with the specificity of your budget. In fact, the more specific your budget is, the simpler it becomes to make budget-concious decisions throughout the month.
Rather, what I’m talking about is simplifying the process of living on a budget.
For example, when my wife and I first started budgeting, one of the ways we simplified the process was to make every purchase through our joint checking account. That’s right, we completely gave up spending money on credit cards.
Well, we did it for a few reasons:
- Spending money with a debit card completely eliminates the risk of high-interest debt. Since you can only spend the money you actually have, you don’t have to worry about going into debt.
- Either one of us could log into our budget at any time and log all of our expenses. Since we didn’t have to log into multiple credit card accounts, once we logged all the transactions from our checking account, we knew our budget was completely up-to-date. Now that’s simple!
- It kept our spending habits out in the open in our marriage. In other words, when you’re only spending money from one account, there’s complete transparency in your finances as a couple.
This is just one example, but there are all sorts of ways to simplify the budgeting process.
For you that might mean transitioning from a hand-written budget to an app or a Google Sheet that allows you to log your expenses no matter where you are. It might even mean going cash-only with your spending.
In the end, the less complicated you make your budgeting process, the more likely you will be to stick to it.
3. Play To Your Strengths
If there’s something I’ve noticed in the world of personal finance, it’s that there is no one-size-fits-all solution.
What works for some people might not work for others. So, when you’re trying to improve your budget, it’s important that you use strategies that play to your strengths.
For example, some people thrive with a hand-written budget, while other people prefer a spreadsheet.
You might be great at looking for ways to cut expenses, while other people might be great at finding ways to earn extra money.
No matter what your strengths are, the key is to make them work to your advantage.
As a good example, my wife is fantastic at finding the best possible deals whenever we need to make a purchase. So, whenever we plan out our weekly grocery list, she typically figures out which stores have the best price for each item, and breaks our shopping list down by grocery store.
I, on the other hand, am more of a manage the budget kind of guy. So, in most cases, I’m the one logging our daily expenses into our budget.
The point is, we both use our strengths to improve our budget.
To be clear, if you want to improve your budget, you’ll still have to do the things you don’t like doing.
It just makes budgeting a lot more effective when you maximize your strengths.
4. Automate Whenever Possible
One of the best ways to improve your budget is to find ways to automate your finances.
For instance, you can automate your retirement investing through your employer, your monthly savings through direct deposit, and even your monthly bills like your mortgage/rent and utilities.
Since automation helps you make sure you never miss a payment, it can take a lot of pressure off of the entire budgeting process.
5. Include Due Dates In Your Budget
For such a simple tip, but you’d be amazed how much easier it makes budgeting.
At the beginning of the month, when you’re planning your budget, write the approximate due date next to every fixed expense.
For instance, if you have auto pay set up for your car insurance premium on the 5th of each month, your car insurance line item will look like this: “Car Insurance (5th)”. Or, if your electric bill is due on the 20th of each month, it will look like this: “Electric Bill (20th)”.
This tip is especially useful when you have a lot of automatic payments set up. However, it can also help you keep track of when you need to manually pay bills throughout the month.
I know this might sound a little too simplistic to have a big effect, but including payment due dates next to each of your monthly expenses is a quick and easy way to stay organized and improve your budget.
6. Identify Your Spending Triggers
If you’re looking for a great way to improve your budget (and you open to a little self-honesty) one of the best things you can do is identify your spending triggers.
A spending trigger is anything that causes you to spend money when you shouldn’t.
For some people, a spending trigger might be grabbing drinks with co-workers after work. For others, it might be hanging out with a particular friend. Even something as simple as boredom can be a spending trigger if it causes you to do a little online shopping.
Seriously, I’ve never met anybody that didn’t have a single spending trigger. And the longer you wait to get them out into the open, the more dangerous they can be.
So, if you haven’t already, take some time to examine your financial behavior, and find your spending triggers.
Then, create a clear plan to avoid or conquer them. Like any bad habit or destructive behavior, the sooner you identify and deal with your spending triggers, the better off you’ll be.
7. Isolate Your Savings
When it comes to budgeting, one of the most counterproductive things you can do is dip into your savings account. After all, what’s the point of budgeting if you constantly spend the money you worked so hard to save?
Therefore, if you want to improve your budget, one of the best things you can do is set up a separate savings account at a completely different bank than your checking account.
Why is this so beneficial, you ask?
- It will help you keep your money out-of-sight, which will make you less likely to spend it.
- It will make your money less convenient to access. Since you won’t be able to make an instant transfer from your savings to your checking account, it will provide you with a day or two to think twice about any impulse purchases you consider.
This is especially great when you’re saving up an emergency fund, or trying to save for a large purchase like a down payment on a house, a vacation, or a car.
Summary: How To Improve Your Budget
There you have it! Seven of the most effective ways to improve your budget.
Just remember, a budget is only as good as the person using it. If you aren’t willing to put in the work to make it a success, then no budgeting tip or strategy will improve your financial situation.
On the other hand, if you are willing to commit to making improvements, then these tips will help get you squeeze every last drop out of your monthly budget.