7 tips to help you make a budget you’ll follow
Creating a budget can feel overwhelming, but it’s an essential part of managing your finances. Being intentional about what you spend your money on can help you stay within your means, pay your essential expenses, and save for what you want.
One strategy many people find helpful is setting a high-level target for spending and saving goals. Here are some ways to help keep you on track.
The 50/30/20 concept: Balancing necessities, wants, and savings
The 50/30/20 concept can help you balance your expenses. The rule suggests that 50% of your after-tax income should go toward essential expenses, 30% toward things you want, and 20% toward savings.
Essentials: 50%
Your essential expenses are things like rent or mortgage payments, utility bills, groceries, transportation, health care, and childcare costs. These expenses should take up no more than half of your after-tax income.
Wants: 30%
No more than 30% of your budget should go to things you love but can live without. That’s things like going out to eat, shopping trips, entertainment, and travel. This budget gives you room to enjoy life while still being responsible with your money.
Savings: 20%
The remaining 20% of your after-tax income should be saved or invested for your future. This category includes retirement savings, emergency funds, and other long-term savings goals. As a rule of thumb, try to keep at least 12 months of your gross income (income before taxes) set aside for emergencies.
Tips and tricks to make your budget stick:
1. Don't starve your emotions
The 50/30/20 plan encourages you to treat yourself occasionally. You shouldn’t feel like you have to deprive yourself of small luxuries like a morning latte or a can’t-miss concert. After all, if you restrain yourself from spending for too long, it may negatively affect your overall quality of life.1
2. Track your spending
The first step to creating a budget is to track your current spending. Use a spreadsheet, a budgeting app, or go old school with a pen and paper to document your monthly expenses. Be honest and include every dollar you spend.
3. Categorize your expenses
Next, separate your expenses into three categories: Essentials, wants, and savings. Again, use the 50/30/20 concept as a guideline, but adjust the percentages to fit your unique situation.
4. Identify opportunities to cut expenses
Look for areas where you can trim expenses, especially in the wants category. Consider alternatives to costly wants or brainstorm ways to negotiate lower rates for bills. Can you aim to do one less takeout meal per month; come up with ways to make that vacation budget stretch a bit further; or ask your cable company if you qualify for any discounts?
5. Set goals
Identify your short- and long-term financial goals, such as paying off debt, saving for a vacation, or increasing retirement contributions. Use these goals to motivate you to stick to your budget.
6. Making tough decisions
Budgeting is all about getting real with yourself about your actual living expenses. If your necessities (like rent, groceries, and utilities) cost more than 50% of your income, you may need to make some sacrifices. If your rent is high compared to your income, for example, you may need to cut back on going out or ordering in. Though it can be tough to make these decisions, it’s worth it in the long run. Budgeting can help you reassess your living arrangements or explore new income sources so you can live more comfortably.
7. Review and adjust your budget
Review your budget regularly, at least once a month, to ensure you’re staying on track. Don’t be scared to get creative to make it work for you. The 50/30/20 concept is customizable, so you can shift funds from your discretionary 30% to cover the difference. Just make sure you prioritize saving that 20 percent!
Creating a budget may take time and effort, but the payoff is worth it. Effective budgeting will empower you to make responsible financial decisions without sacrificing your emotional well-being. If you don’t want to start alone, reach out. I can help guide you. Stay positive, focus on your goals, and you'll be on your way to a brighter, more confident financial future.
Disclaimer:
1 5 Key signs your budget is too restrictive, GOBankingRates, 2024
This material is intended for general use. By providing this content The Guardian Life Insurance Company of America and your financial representative are not undertaking to provide advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian® is a registered trademark of The Guardian Life Insurance Company of America, New York, NY. Copyright© 2025 The Guardian Life Insurance Company of America. All rights reserved.
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