10 Surprisingly Simple Ways to Build a Budget That Works

If you’ve tried budgeting and failed, you’re definitely not alone. You know you need to do it, but maybe you just haven’t found the best approach to commit to fully. 

Those resistant to the process may feel like it’s a punishment, but budgeting is just a spending plan for your money. It takes your income, expenses, and financial goals, like saving or paying down debt, into account. It gives a clear picture of how much you have left at the end of the month, what areas you may be spending too much on, or what areas you’re not spending enough on. 

You don’t want to run OUT of money, right? Well, a budget can help you with that, so let’s get started with some ways to help you build one!

1. Know What Your Real Income Is

List down what your monthly take-home pay is after taxes and deductions. 

You can easily refer to your pay stubs and your direct deposit amounts to get your take-home pay amount to record. If you have any other sources of income, add them to the list, like side hustles and/or tips. 

ADP also has a useful Salary Paycheck Calculator to help you with the numbers.

2. Time to Track Your Spending for 30 Days

Now that you know how much money is coming in, you’ll need to track how much is leaving you! 

You can stick with Google Sheet templates to track down every expenditure, or you can use free apps like:

• Rocket Money (the free plan)
• PocketGuard
• EveryDollar
• Fudget

Another popular app is YNAB, aka You Need a Budget, but after a 34-day free trial, there is a monthly cost that regular users say is worth it. We suggest trying out the free apps above first to see which suits your style, and later, check out YNAB for their automated platform!

The purpose of all this tracking? So you can look for patterns where you can plug up spending holes, particularly subscriptions, excessive food delivery like Uber Eats/DoorDash, retail therapy, coffee runs, etc. 

Track everything down, no matter how small! This will give you an honest take on what you actually spend in a month, which can be easy to ignore when swiping a credit card.

3. Choosing a Budgeting Method That Fits YOU

The best budgeting method is one you’ll actually use and that you can stick with in the long run. Here are some different types to try:

50/30/20 RULE

This is one of the most popular methods that divides your monthly income into 3 main categories. U.S. Senator Elizabeth Warren popularized this budget rule in her book, “All Your Worth: The Ultimate Lifetime Money Plan.”

It might look complicated, but it’s easy to remember.

50% of your monthly income goes to NEEDS, which are things you need for survival:

• Rent/mortgage payments
• Car payments and fuel
• Groceries
• Health care/insurance
• Bills like utilities and debt payments
• Child care

After tracking your spending, if you see that you’re spending MORE than 50% on needs, then you might need to downsize your lifestyle, as the biggest expenditures are your living situation and/or car. Do you need to add a roommate? Get a more modest car? Maybe you can bike to work/carpool to save on gas, and cook more often at home.

30% of your monthly income goes to WANTS, which are non-essential things:

• Gym membership
• Clothing and accessories
• Vacations
• Tickets to sporting events, concerts, live entertainment
• Streaming subscriptions
• Electronic gadgets

These are just some examples of what can help you enjoy life, but moderation is key to staying within the 30% range of your monthly income! Maybe you can work out at home instead of paying for a gym or watch the game on your TV instead. Evaluate if you really need that ultra-high-speed internet if you’re only using up to a certain threshold. Already got a functioning phone? Great! There’s no need to update to the latest model every year.

20% of your monthly income goes to SAVINGS, which will be vital for your:

• Emergency fund 
• Retirement (Roth IRA, Traditional IRA, and 401K contributions)
• Additional savings towards long-term goals like a car or house
• Additional debt repayments beyond the minimum to pay it off faster

The original rule of thumb for how much to save in your emergency fund was 3-6 months, but in today’s climate, where job security is shaky and too many unknowns can happen, it’s now best to aim for at least 12 months. 

Percentages of the 50/30/20 rule can also be adjusted to fit your needs. For example:

60/20/20, where it’s 60% Needs, 20% Wants, and 20% Savings

70/20/10, where it’s 70% Needs, 20% Wants, and 10% Savings

It’s up to you!

ZERO-BASED BUDGETING

This method basically gives every single dollar of your monthly income a job, whether it’s paying bills, saving, or spending. Nothing sits around! It’s your income minus expenses equals zero. This type of budgeting is great for people who want total control over their money, who need to pay off debt, or anyone with irregular income. 

When you give every dollar a purpose, it helps eliminate mindless spending and makes sure your priorities are covered first! The YNAB app mentioned previously uses this method.

ENVELOPE-BASED BUDGETING

Also called cash stuffing on TikTok, you divvy up your take-home pay into specific categories using labeled envelopes. You put the cash in its specific envelopes and can only spend what’s in it. If all the money in your “Wants” envelope is gone, then you can’t spend until the following month.

While this system lets you closely track the money you have in each envelope, it’s also a pain and a security risk to keep large amounts of cash at home. You’ll also miss out on earning interest from a high-yield savings account versus cash. If you want to try this method to curb impulsive spending, you can try the digital version, Goodbudget, which has both a free forever plan and a premium plan ($80/yr).

4. Pay Yourself First!

Budgeting is something that only you can do for yourself, so prioritize saving and “paying yourself first.” You can utilize the automated feature of your savings account to set aside money every week, no matter how small, to build that habit. Consider it a non-negotiable “expense” that will benefit the most important person in your life: YOU. 

No matter what amount you choose to save per week, celebrate your wins that you’re actually doing what you said you’d do!

5. Don’t Lump Checking & Savings Together

Your checking and your savings accounts should be separate. Period. Most checking accounts barely earn interest, if at all, so keeping your savings in a high-yield savings account will let you grow your money even while you sleep!

It also gives you clear goals and makes tracking a lot easier for your budget. You’re also less tempted to spend the money when it’s out of sight, out of mind!

6. It’s OK to Give Yourself Fun Money

Budgeting doesn’t mean keeping your money trapped in a prison, it’s about giving your money purpose. This includes “fun money” to permit yourself to enjoy life while still staying on track with your financial goals. 

Small joys like going to the movies or ordering takeout can help you avoid burnout and make your budget more sustainable. Just like being on a too-strict food diet of only salads and boring food, you’re more likely to ditch it completely if you can’t have any “fun.” The same goes for budgeting, as it shouldn’t feel like punishment! However, if you KNOW you’ve been spending way too much before you started budgeting, take into account what you really need and want to spend for your “fun money.”

7. Make Weekly Goals Instead of Monthly

Looking at your budget once a month can be overwhelming since, by the time you realize you’ve overspent, it’s too late to adjust. This is where weekly budgeting can be helpful.

Instead of thinking about how to make your paycheck last for 30 days, you’re focusing on 7 days. If something goes off track during the week, you’ll be able to fix it quickly rather than at the end of the month. 

You’ll also get in the habit of checking in with your money regularly, so there’s less panic and more control. This is great if you get paid weekly or bi-weekly, or if your income fluctuates.

8. Review Your Budget & Adjust Regularly

While your saving automation can be good to “set it and forget it,” budgets aren’t. Things can change rather quickly, and you should be able to adjust regularly to course-correct.

That’s why a 10-minute weekly or even bi-weekly check-in for your budget can be super valuable. You can ask yourself: Did you overspend? Underspend? Do you need to move anything around?

Small adjustments will help you stay in control and avoid any unwanted surprises!

9. Use Cash Back and Rewards Wisely

Credit card points, earnings from cash back apps like Rakuten, Fetch, and Upside, and rewards are great extra money opportunities, BUT they should be treated like bonuses and not as an excuse to overspend. 

Don’t spend more on something you may not need just because you can get extra points or cash back. You can transfer the cash back or rewards into your savings or use them to be put towards your next essential purchase.

10. Aim To Be Realistic, Not Perfect

Your budget doesn’t have to be perfect, just functional so that it can work for YOU. It’s a living and evolving process that can adjust as life happens, since unexpected expenses and maybe a splurge here and there can certainly occur.

The most important thing is to keep going and to learn from any setbacks. Just remember: progress over perfection!

The Money Move

We’ll say it one more time, and even louder: the best budget is the one you’ll actually use and stick with. Go ahead and start simple at first. Over time, you can add more layers and try other methods to find what works for you at this stage of life. 

The first step is the hardest to take, but once you make progress, celebrate and continue to celebrate those wins, no matter how small they are!