When we say saving, we really mean budgeting – because budgeting is what helps you save! A budget is simply a plan that lays out your income and expenses as precisely as possible. It helps you use credit wisely and meet your financial goals, such as saving up for your down payment or making a monthly mortgage payment. A budget can help you uncover your spending patterns and discover places where you can save.

Adjust your attitude

Like dieting, the biggest budget blunder is subscribing to the "cut 'til it hurts" mentality. When creating your budget, it's easy to look at your expenses (like utilities, food, transportation, clothing and entertainment) and start slashing.

A budget like that may look good in theory and build savings quickly, but would you stick to it? What would it do to your quality of life? A workable budget will help you guide your spending so that you can build your savings while still enjoying your life. Unless you are in dire financial trouble, there’s no reason setting a budget should be painful.

A good budget helps you:

  • Understand how and where you spend your money
  • Increase your savings
  • Prevent or reduce impulse spending
  • Protect against the financial effects of the unexpected, like unemployment, accidents, sickness, aging and death

Identify your expenses

You know what you spend on rent each month, but do you know what you spend feeding the parking meter, feeding your afternoon popcorn habit, or feeding the dog? Keep a detailed record of all income and expenses, right down to the change used for the vending machine. Once you see where you spend money on a daily basis, you can get a much clearer picture of your overall monthly expenses.

Our monthly budget worksheet can help you get started.

Make simple, logical changes

Once you have a picture of where your money is going, it's usually clear to see where you can make changes. You don't have to make big changes that sap the enjoyment out of life. Small sacrifices can add up to significant savings.

You might decide to make coffee at home or bring your lunch to work more often. Maybe you don’t need to subscribe to every streaming service. Or you could catch up on classic movies at home instead of seeing the latest blockbusters in the theater (added benefit: pajama dress code).

To set a good budget, you may have to do some research, make some calls, and ask some questions. But after the initial legwork, a good budget will be simple and flexible, and won’t require a huge time investment to maintain. A good budget works for you, not against you.

Budgeting to maintain your home, not just buy it

Saving for a down payment might seem like your #1 priority right now – but remember that it costs money to maintain your home as well. To be a successful homeowner, it's important to set aside funds in your monthly budget for home maintenance.

Budgeting for these expenses monthly will help you identify, plan for and effectively manage the costs associated with owning your home. Your budget will help you address day-to-day maintenance, as well as plan for financing major improvements and meeting emergency maintenance needs.

Tips for successful budgeting

  • Be collaborative. Talk with your household (whether that’s your partner, your kids, your pet turtle or your roommate who needs to know why you started buying 1-ply toilet paper) and make sure they feel they are a part of the plan. If everyone affected truly understands the rewards, they may work harder to make the budget succeed and be less inclined to overspend.
  • Be specific. If your goals are vague, you may never meet your objectives. You and other household members may have different ideas of what the end result should be.
  • Be prepared to compromise. If, for example, you want to pay cash for things and your partner prefers credit, you’ll need to discuss the pros and cons of both methods and decide on a middle ground. A financial plan is also a financial partnership!
  • Be realistic. If you set goals and objectives that are too hard to meet, you’ll be more likely to abandon your plan when frustration sets in.
  • Exercise will power. You’ll face financial temptations every day, but stay strong! Each family member needs to encourage the others to stick to the plan.
  • Be flexible. Your lifestyle and financial situation is always evolving. Don't make a budget that is so rigid that each new development requires an entirely new plan.
  • Keep good records. You can’t just “set and forget” a budget. Continue to track what you spend so you can see how well you are following the plan and if you need to make further adjustments to meet your goals.
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