Budgeting How to Budget Successfully By Miriam Caldwell Miriam Caldwell Miriam Caldwell has been writing about budgeting and personal finance basics since 2005. She teaches writing as an online instructor with Brigham Young University-Idaho, and is also a teacher for public school students in Cary, North Carolina. learn about our editorial policies Updated on April 1, 2021 Reviewed by Thomas J. Catalano Reviewed by Thomas J. Catalano Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning. learn about our financial review board Photo: Granger Wootz / Blend Images / Getty Images It's one thing to know that you need a budget, and another to make one and stick to it. According to a survey from personal finance management company Mint, 65% of Americans have no idea how much money they spent last month. Other research has shown that money is the primary source of stress for many Americans, even more so than personal relationships or work. Making a budget—and sticking to it—can help alleviate financial stress. The majority of people who maintain a budget report feeling more in control, more confident, and more secure. Convinced, but not sure how to proceed? This multistep approach to budgeting can help you get started. Stop making budgeting excuses, and avoid budgeting mistakes with these helpful tips. Before You Budget Over 32% of people who don't have a budget say that they don't make enough money to need one—or that they're too poor to budget. This highlights one of the main stumbling blocks for many: not believing in the budgeting process to begin with. Before you budget, you need to decide what you want your plan to do for you. Consider these activities to help you brainstorm: Write down three or four things you want to accomplish in the next five to 10 years. This may include things like home ownership, starting a family, or running your own business. Write down two things you want to accomplish in the next year in regard to your finances. Perhaps you want to pay off debt, build an emergency fund, or start a new career.Write down one thing you want to accomplish in the next month. This may be saving a certain amount of money or not using your credit cards for at least 30 days. Set Up Your Budget Once you have decided on your goals, you can set up your budget. To start, gather all of the necessary paperwork you may need, such as bank statements or investment accounts. You'll want to calculate your expected monthly income, as well as your typical monthly expenses, and break it all down into categories. If your income is higher than your expenses, you are off to a good start. Note Be sure to identify fixed expenses and variable expenses in your budget. While fixed expenses are those that you pay the same amount for each time, such as your cable or water bill, variable expenses, like groceries, tend to change monthly, depending on your needs. You don't have to maintain your budget manually. Consider using budgeting software to help you track expenses. Some programs will load the last three months of transactions, and you can base your budget off of that. Others have unique features that can send you a warning when you're about to stray over budget. Track Your Budget Once you have created your budget, you are ready for the hard part: following it. This step is when many people who attempt budgeting tend to fail. It can be time-consuming to track your expenses, record your transactions each day, and subtract them from the correct budget category. Even more challenging: making sure your expenses do not exceed your income. You can use computer software, make an old-fashioned, pen-and-paper budget, or rely on the envelope system to make your budget work for you. Note Take time to review your budget each night for the first month to help you track your categories. Evaluate Your Budget After one month, you will need to evaluate your budget. This is essential for getting it to work. Ideally, you should plan to evaluate your budget monthly for at least the first six months. This will help you learn to identify your budget weaknesses. Then, you can make adjustments to areas where you may have estimated the wrong amount. In the first month, you should not make major cuts, but each month after that, try cutting back to save more. After the first two months, you may be able to cut your spending back even more than you originally thought, and increase the amount you put toward your goals. Keep in mind that it is OK if you realize that you need to increase spending in a category; just be sure to subtract that amount from another category to keep your budget balanced. Set Goals for Your Budget After you have reached your original goals, you may want to set new ones. By continuing to set goals in the future, you will continue to move your financial habits in the right direction, and also better navigate where you need to cut spending. You can also reward yourself for meeting new spending limits. For example, you may treat yourself to a nice meal out if you meet the goals you have set for your grocery budget each month. Cut Spending Each year, you should evaluate areas where you can cut your spending. It is easy to assume that your bills are set in stone and that you cannot do anything to lower them. However, if you shop around every year or two, you may find deals on expenses like internet, car insurance, or gym memberships. You may find that you save quite a bit of money with just a few hours of research beforehand. As you do that, evaluate whether you need the level of services you are getting, and cut back if you can do so comfortably. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Mint. "Survey: 65% of Americans Have No Idea How Much They Spent Last Month." Northwestern Mutual. "Planning and Progress Study 2018." CFP Board. "Consumer Views on Personal Cash Flow Planning," Page 12. Debt.com. "Debt.com’s 2020 Budgeting Survey Reveals More Americans Than Ever Are Budgeting."