9 Best Budgeting Tips For 2024

Learning to manage your money is crucial to your long-term financial success. Without smart spending habits, it’s harder to reach major money goals, quell financial anxiety, or have extra funds for unexpected expenses. So read on for our best budgeting tips, whatever your current financial situation.

3 Good Budgeting Tips For Beginners

Before diving into our main budgeting tips, here are some beginner techniques to set a budget and stick to it:

The 50/30/20 Rule

The 50/30/20 rule suggests allocating 50% of your income to needs, 30% to wants, and 20% to savings. It’s a basic rule of thumb that can help you keep your finances in check. For example, if you make $10,000 per month, the 50/30/20 rule would have you put roughly $5,000 toward needs (like housing costs, utilities, and groceries), $3,000 toward wants (like vacations and eating out), and $2,000 toward savings (including retirement and emergency funds).

Zero-Based Budgeting

Zero-based budgeting is a strategy typically used by businesses, though it can also be effective for individuals. It involves assessing your needs anew each month and budgeting accordingly,  starting from a “zero base.” That way, you give each dollar a job (for example, expenses, savings, debt payments, etc.), and aren’t left with unassigned funds at the end of the month.

Cash-Based Budgeting

Cash-based budgeting uses cash for variable expenses. Once you’ve paid your fixed monthly payments (rent and phone bill), the rest of your income goes toward all other expenses. For example, you can label envelopes with different spending categories (groceries, gas, savings, etc.) and put cash in each one (this method is also called cash stuffing). The beauty of this method is that you can’t overspend on one category without deliberately taking money from another.

2 Ways To Pay Down Your Debt

Careful budgeting can also help reduce your debt. Here are two popular methods for paying off debt efficiently:

The Snowball Method

The snowball method involves tackling your smallest debt first and then working your way up to the biggest. This builds a sense of momentum that can motivate you to keep going. Plus, with each debt you eliminate, you’ll have more funds to put toward the next one.

In practice, the snowball method means making the minimum payment on all of your debts (to avoid late fees and other penalties) and then allocating as much as your budget allows toward your debt with the smallest balance. Repeat until all of your debts are paid off.

The Avalanche Method

The avalanche method has you pay down your debts in order of highest to lowest interest rate. This minimizes your interest costs in the long run. However, unlike the snowball method, it may take longer to pay off the first debt, after which the remaining debts can be repaid more rapidly.

In practice, the avalanche method means making the minimum payment on all of your debts and then using any extra money to pay off the bill with the highest interest rate. Then repeat until all of your debts are paid off.

Without further ado, here are our top tips on how to budget:

1. Determine Your Budgeting Goals

To budget effectively, you must set financial goals. These could be long- or short-term goals that reflect where you want to be in the future. Here are some examples:

Major Purchases And Expenses

Some major purchases and expenses, such as buying a vehicle or putting a down payment on a house, require careful forethought and planning. Setting aside a little money each month to contribute to these savings goals can go a long way.  

Long-Term Debts

Long-term debts such as mortgages, student loans, and auto loans can take a toll on your monthly income. Budgeting for regular payments to help pay off these debts can help you keep your finances under control.

Retirement

Don’t overlook planning for retirement in your budget. Regular contributions to an individual retirement account (IRA) or 401(k) plan can help prepare you for a comfortable lifestyle when you stop working — especially if it comes with an employer match.

Major Life Events

Occasionally, you may need to save up for a major life event such as a wedding or vacation. Working these into your budget ahead of time can help you avoid being caught with insufficient funds to pay for them. 

Living Expenses And Discretionary Income

Of course, you should also fit everyday living expenses (like rent, utilities, and groceries) and discretionary spending (such as entertainment and eating out) into your budget. Set aside a monthly amount for both categories to make your monthly expenses more predictable. 

2. Be Realistic And Measurable

Setting a budget is one thing. Sticking to it is another. To ensure you meet your budgeting goals, keep them realistic and measurable. For example, track your spending by keeping receipts or monitoring online accounts for debit and credit cards. Then allocate your income to various categories based on how much you spend on them on average. Having measurable budgeting goals can keep you accountable and help you correct course as needed.

3. Categorize Fixed Vs. Variable Expenses

When analyzing your living expenses, consider separating them into fixed and variable costs. This can make it easier to estimate future monthly expenses.

Fixed Expenditures

Fixed expenditures are recurring costs that stay the same from month to month. Some examples include rent or mortgage payments, phone and internet bills, subscription services, and renters or homeowners insurance.

Variable Expenses

Variable expenses are those that change based on your needs and the current market. Some examples include groceries, fuel, shopping, dining out, entertainment and car repairs.

4. Use A Spreadsheet Template Or Budgeting App

Spreadsheets and budgeting apps can help streamline your budgeting process. For example, with a spreadsheet, you can start with a template and customize it based on you needs, create visualizations of spending patterns and trends, and identify areas for improvement with sorting and filtering functions.

Similarly, budgeting apps can automatically track your spending by syncing with your financial accounts, help you set budgeting goals, and give you real-time updates on how much you have left to spend in certain categories.

5. Automate Recurring Monthly Payments

Another way to ensure you pay your bills on time is to automate your finances. This involves setting up automatic money transfers from your bank account. Subscription services like Netflix, for example, tend to make it easy to set up autopay. However, you may also be able to automate paying for your car insurance, utilities, mortgage payments and other expenses.

Automating your finances not only saves you time but helps you avoid missed or late payments. You can relax, knowing that all of your bills are being paid on time.

6. Cut Your Spending

Your budget can include a plan to eliminate unneeded spending.

Subscriptions And Memberships

According to a CNBC consumer survey, people spend an average $133 more each month on subscriptions than they realize. To avoid this, consider cutting back on them. For example, the Rocket Money℠ app can help reduce this type of spending by identifying subscriptions you don’t use anymore and cancelling them for you.

Delivery And Dining Out

Takeout and food delivery can have an outsized impact on your budget. To limit these costs and improve your ability to reach important savings goals, give yourself a set amount to spend on dining out and delivery each month.

Impulse Buys

Impulse buys are purchases made in the moment without regard for your budget. Common examples include snacks and clothes. To avoid overspending on such items, try not to shop when hungry or tired, use cash over credit cards, and consider waiting 24 hours before buying.

7. Start An Emergency Fund

If you don’t have one already, start an emergency fund. Experts recommend setting aside at least three to six months’ worth of living expenses for a rainy day (or days). This can protect you against unexpected expenses such as medical bills, car repairs, or sudden job loss — providing peace of mind. Fortunately, you can allocate a set amount of money from each paycheck to go directly to an emergency fund via automatic withdrawals or budgeting apps.

8. Limit Credit Card Spending

Credit cards make it easy to spend by letting you instantly borrow money. However, if you don’t pay them off on time, you could accrue interest at a steep rate. In 2023, the average APR on credit cards was 22.8%, according to the Consumer Financial Protection Bureau (CFPB). This can make credit card spending much more expensive than using a debit card, even when balanced with cardholder perks.

9. Revisit Your Budget And Make Necessary Adjustments

Your budget isn’t meant to be a static document. You should regularly revisit it and adapt it to your changing lifestyle, your financial priorities and the overall market conditions. That way, you can keep your budget current and optimize it over time.

Ultimately, budgeting is an indispensable part of keeping your finances in check. No matter how much money you make, you can always spend more. To put your budgeting on autopilot, download the Rocket Money app. It can help track your spending, lower your bills and more!