How to Budget Your Money Better – 8 Tips

Calculating your budget out in detail will give you a significant advantage for managing your money.

When I am trying to figure out my budget, I always determine what my expenses are first.

I figure out what the realistic expenses are and then come up with strategies to save more money.

This post will focus on the 8 best tips for budgeting including:

Calculate Expenses

Turn Yearly Expenses Into Monthly Expenses

Determine Post Taxes Income

Build a Safety Net of Money

Become More Frugal With Other Expenses

Set Short and Long Term Goals to Focus On

Check Out Saving and Checking Account Every Month

Use Helpful Budgeting Tools

These 8 tips will set you up for success and allow you to have a very strong budget.

Through this post I will show the best steps to take to manage money, calculate effectively and learn how to budget your money better.

Calculate Expenses

Sitting down and typing out a list that includes all your expenses will help you figure out what you expend per year. I use my online bank account records to determine what all my expenses are and what they cost per month or per year.

I determine my expenses by typing out a list on a computer and then figure out how much each expense approximately comes out to be.

If I want to know what I spend on groceries for the year, then I can calculate what I spend each week and multiple that amount by 52 to get my yearly expense.

Calculator
Calculate Expenses

If I spend $70 on groceries each week, then $70 times 52 would be $3,640.

$70 = Weekly Grocery Expense

$70 x 52 = $3,640 Yearly Grocery Expense

You can break down any of your expenses this way to calculate what your total yearly expenses come out to be.

I always include a miscellaneous expense where I throw in potential unforeseeable expenses.

Having this expense in the budget helps account for any expenses that I haven’t thought of or ones that seem to come out of nowhere.

Writing out this list can help give you an idea of where you could improve. Sometimes when you look at your online bank account records you can find that there is a subscription that you aren’t using anymore. This could help you save money by stopping that right away.

Taking the time to write out this list can be very beneficial because once it is completed you know where you financially stand.

Once you accurately know what your expenses are, you can begin the process of coming up with strategies to save more money.

Turn Yearly Expenses Into Monthly Expenses

I like to establish what the yearly total expenses are and then break them down further into monthly expenses. These monthly expenses are easier for me to get my head around.

A once a year expense could be going to the dentist, which costs about $150, if it is just a regular cleaning.

But instead of seeing this as a once a year expense, you can divide the 150 by 12 to equal 12.5, which will give you the monthly expense of going to the dentist once a year.

Dentist Office
Save Money Each Month for Yearly Dentist Expense

$150 = Yearly Expense for Dentist

$150/12 = $12.5 Monthly Expense for Dentist

I like to break down every expense I have into a monthly expense because it turns each expense into a much more manageable number.

Once I started saving more money per month to account for ALL of my expenses, I quickly felt much more prepared and in control of my life.

By turning a once a year expense into a monthly expense, you accurately can work out what you will need to save each month to be financially prepared for that once a year expense.

Saving a little each month will help you be as financially prepared as possible to handle this expense and all of your yearly expenses.

Determine Post Taxes Income

Determining what your income is after taxes is mostly about using the right websites and finding the correct information. I like to first find where the information is for the following taxes:

  • FICA tax, which includes Social Security and Medicare
  • State income tax
  • Federal income tax

The FICA tax comes out to be 7.65%, which includes Social Security at 6.2% and Medicare at 1.45%, for your taxable income.

The State and Federal income taxes are dependent upon how much you make.

But I like to use the following calculator to quickly calculate all my taxes, Free Income Tax Calculator.

If you use this calculator, you will then be able to enter your total income for the year, what city you live in and you’re filing status.

This website calculates what your total taxes are as well as what your post taxes income will be by calculating what your FICA, state and federal incomes taxes will be.

I like how you can simply enter a number into the calculator and it quickly gives you an accurate estimate of what your taxes will be.

It even has an advanced option where you can add itemized deductions, IRA or 401K contributions and number of personal exemptions.

Pile of Money
Build a Safety Net of Money

Build a Safety Net of Money

Building a safety net of money will be able to give you a cushion that allows you to manage your money better.

A safety net of money can take some time to build up but once you have it established you will feel much more secure.

I like to use a 3 Months Worth of Expenses amount as enough to hold me over in an emergency.

This amount gives me some cushion so if an unforeseeable expense came up, or if I had to take some time off from work for an injury, then I would be able to cover it.

As I gradually built up money in my bank account, I started to feel better and more in control of my finances.

You don’t have to save up 3 months worth of expenses for your safety net but this is an accepted amount that from personal experience is the right amount.

It took me some time to determine what was an amount that makes me feel secure. For some people they would only need half as much as me while others would want much more of a buffer.

Building up your bank account to include enough funds to support yourself for 3 months worth of expenses should be a solid amount to prepare you for an unforeseeable expense.

Become More Frugal With Other Expenses

After you have calculated your expenses and post taxes income, you should try to find other expenses that you can reduce. I initially looked at my new list of expenses and determined which expenses I could scale down.

Two years ago was when I significantly started working on budgeting my money better. I quickly figured out there were a lot of different areas where I could improve myself.

There were many areas to improve in but I focused on the ones that were going to save me the most money.

Sandwich
Prepare Food More by Meal Prepping

The main areas to focus on include the following:

  • Food
  • Car Expenses
  • Miscellaneous Expenses

Food

Saving money on food by meal prepping is often a big area to save for most people.

Becoming much better at meal prepping could allow you to save a lot of money and time because you will not be as likely to go out to eat as much.

I like to prepare simple foods, such a smoothie, sandwich and spaghetti with black beans dish, so that I am prepared for the day. Focus on easy to make foods as well as buying more food at the grocery store.

If you buy more food from the grocery store and have it in your refrigerator, then you are much less likely to go out to eat.

Take the time to stock up your kitchen and cupboards consistently with food that you like and you could save a bunch.

Washing Car
Wash Car Yourself to Save More

Car Expenses

Car expenses in general can be a potential area to save money. Trying to drive less will cost you less on gas but also save your vehicle the wear and tear that will end up costing you extra down the road.

Reviewing your current car insurance policy could give you substantial savings because this can often be an area that you could be over paying.

If you want to read more about saving money on car insurance, read Most Affordable Car Insurance Companies.

  • Miscellaneous Expenses

Miscellaneous expenses, such as getting coffee or drinks with friends or watching movies, could be a big area for saving money. I like going to the movie theater, but I realized that this was a big area where I could save money.

So I was able to cut down on going to the movie theater and instead stayed home and watch movies more.

If you want to learn about ways to save money, read The Total Money Makeover Review.

Learning how to be frugal can be a big challenge especially if you haven’t been trying to budget your money well. But you just have to be willing to push yourself to change.

Once you are willing to push yourself to change, then you can do a lot more than you think you can!

Set Short and Long Term Goals to Focus On

Setting goals can help you stay motivated on saving for your particular goal. Setting short term goals for saving could help you get a boost for all your hard work.

After creating short term savings goals, create long term savings goals so that you can aim for something further down the road. These long term goals will help keep you honest about what you are trying to accomplish.

But the short term goals will keep you focused on the smaller steps that you are taking to get better with your money.

Check Out Saving and Checking Account Every Month

Review online banking statements to focus on more areas to improve in. I like to review my online statements to make sure that all of my expenses are what I thought they were supposed to be.

You can go to your online bank statement to see all transactions over the last 6 months. I mostly use my checking account because this is where my direct deposit is going into and where most of my expenses are pulling from.

Consistently taking a closer look at your accounts can help you identify any potential expenses that sneak up and chip away at your money.

Use Helpful Budgeting Tools

Using certain budgeting tools can help provide you with tips, strategies and other ideas to stay on track and get better with your money managing skills.

You can focus on the following 3 tools:

A Certificate of Deposit(CD) has a slightly higher payout compared to a savings account and can normally be fixed for 12-24 months of time.

This is usually a good amount of time to have some of your money into an account that is not easily accessible for you. This account will likely earn more money than a traditional savings account.

YNAB stands for You Need A Budget and this is a useful resource for keeping track of your expenses and income. This will give you strategies of how to use your income to cover all your expenses.

YNAB offers a free trial for 34 days so you can try it out and see if it is helpful for you.

Wallet
Use Virtual Wallet

Another tool to try out is a Virtual Wallet, which is part of some banks online resources. This is a tool that can keep track of your expenses and give you helpful ideas on how to spend your money better.

Not all banks have this option but it is worth seeing if your current bank has this as a useful resource.

Determine How Frugal You Want to Live

Figuring out how frugal you want to live is important to determine how much you can save. Once you determine what your expenses and post taxes income are, you will then have the information to start effectively planning out money saving strategies.

I was able to do a lot of different money savings strategies but I also am an introverted person who doesn’t mind living a relatively low key life a lot of the time.

Other people would never be able to live as frugally as I have because they would want a fuller life.

I definitely believe there is plenty of room for saving money for each person but it really comes down to how much you are willing to change.

I hope this post gave you helpful information on how to budget your money better so that you can save more in your life.

If you have any questions, feel free to leave them below and I will answer them as best as I can.

16 Replies to “How to Budget Your Money Better – 8 Tips”

  1. Hi Jesse, loved the post. Really nice ideas that you suggest here and I must admit I have to take control of my miscellaneous expenses before it takes control of me! I’m budgeting a lot to be able to grow a safety net of money because it is always cool to have money to save you. Although, I didn’t think about taking the yearly payment into a monthly one, I’ll try to consider it next time.
    Thank you for these helpful ideas!
    Audrey

  2. I really enjoyed reading your post. I was always great with money until I had my kids, I didn’t adjust my spending enough and now I am playing catch up. I will use some of your tips as I set up my new budget and figure out where we can save and cut costs! We have had several times when we wouldn’t be so set back if we had a cushion to account for the extra expenses. I will definitely be working that into our new budget!! Thanks for the ideas!

  3. These are some great tips. I like the fact how you talk about miscellaneous expenses. Many times when we create a budget we forget about things that could pop up as an expense that we do not calculate.

    A budget is really important. I think we would be surprised how many people live day to day but have no idea of how much they are spending. Knowing where you money is going and having the foresight to put money away in an emergency fund is a recipe for success.

    I loved all of your ideas here. They are well worth doing if you want to stay out of financial hot water. Thanks for sharing.

    1. Miscellaneous expenses can be a big expense and it definitely is a good idea to be ready for it.
      Creating a budget really is so important for keeping yourself out of financial hot water.
      Happy you liked this post!

  4. Hi

    I love this article. I actually don’t think many people really calculate their expenses. And that really is the most important, because it does give you an idea of where you are at, and how much money you need to be making. Excellent read.

  5. Hi Jesse,

    I like the idea of building a safety net which will cover my mandatory expenses for 4 – months. I also suggest keep money towards medical expenses (personal experience) because last year there were some medical exigency in family which depleted our savings. The first thing in the beginning of the year I did is I bought medical insurance for my family.
    I have some questions, when it comes to managing debt – Is there a smart ways to manage / reduce debts, would love to hear your thoughts on the same. Thanks for sharing this post.

    1. Medical expenses can be a big expense and it can definitely be a good idea to save some money each month specifically for that expense.
      I think focusing on saving a little each month is a good way to start reducing debt.

  6. I enjoyed reading your post as it has some very good tips on managing finances. I use Microsoft excel to create spreadsheets of monthly and yearly outgoings, but haven’t broken down yearly into monthly ones yet! I also cook all my own meals, and yes, that saves quite a bit on grocery bills! I’m like you and watch most films on tv. I shop around for car insurance each year and always get a good deal.

    1. It sounds like you have a great system setup to save money!
      I definitely look around at different car insurance prices each year to make sure that I am getting a good deal too.

  7. Some really great content here and I could really put some of your suggestions into action. I can make some money, but not real good at managing it! Spend to much! But these tips could really help me out!

  8. Hi Jesse I love your post .It is very important to save and make arrangements for the future. I love the part about saving for yearly expenses- monthly. Make sense. Great ideas especially for young people

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