Budgeting tips for beginners you’ll actually want to follow

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Budgeting tips for beginners that you’ll actually want to follow

Budgeting

The hardest part of setting a budget is getting started. After all, it’s a task that comes with a lot of baggage. Sure, sweeping the floor or making the bed might not be enjoyable. Still, at least it’s not likely to send you into an existential spiral that makes you question your past, present, and future, as well as your self-worth, the meaning of life, why the sky is blue, why the world is round, et cetera.

Okay — even if you find that forcing yourself to think about money doesn’t send you into that very specific lament, everyone can use some unique budgeting tips now and then to achieve a bit of harmony in their financial life.

This article will provide accessible and creative budgeting ideas that can help you cut down on stress and achieve your financial goals, whatever they may be.

1. An emergency fund is your foundation

Would this really be an article about budgeting tips if we didn't get the first harp on an emergency fund's importance, at least for a little while?

Before you even start creating a budget for yourself, and especially before you even start thinking about your long-term goals, it's a good idea to determine what a comfortable emergency fund looks like for you.

For some individuals, $1,000 may be enough to have them feel comfortable. Others won't sleep well at night without at least three months worth of expenses set aside. There is no magic formula to determine how much money you should stash aside in your emergency fund. Instead, it's a personal choice.

If you do not yet have an emergency fund established, it may be in your best interest to allocate a certain amount of your take-home income to save up for one.

Once you've established an emergency fund savings account, you can start saving money for other goals (preferably of the fun variety).

2. Have a savings plan that works for you — not for somebody else

Your friends may try to offer you financial advice — and many of us would be lying if we said we have never offered financial advice to our friends — but unless they are a professional accountant that knows the intricacies of your financial situation, chances are that they cannot accurately tell you how to spend or save money.

Credit Card Scanning

After all, you and your friends have different financial backgrounds, different long term goals, different credit scores.

While it may be tempting to compare yourself to others who seem to save up for a trip or a car with ease, it’s important that you stay focused on your own unique situation, whether it’s saving up to pay off your credit cards or trying to pay for school.

When it comes to putting money aside, the most important thing is consistency.

While the amount of money that you can contribute to your savings accounts may vary based on your particular cash flow, what’s most important is that you stick with it, even if it’s only $5 per week.

Over time, you will see this begin to add up, no matter which amount you’ve chosen to contribute.

Your friends may try to offer you financial advice — and many of us would be lying if we said we have never offered financial advice to our friends — but unless they are a professional accountant that knows the intricacies of your financial situation, chances are that they cannot accurately tell you how to spend or save money.

3. Don’t feel obligated to track your spending (but do spend money mindfully)

Take a deep breath. You have already made it a decent distance into reading this article, which means that you are taking proactive steps towards building an effective budget and setting financial goals for yourself.

It may seem counterproductive to read that you shouldn’t necessarily track your spending on an article about budgeting tips. After all, isn’t the whole point of a budget set a limit for yourself and then to see that you stick to it?

The answer to this, in our opinion, is both yes and no. While setting realistic spending limits for yourself can help you stay on top of your savings goals, it can also quickly turn into a cycle of feeling bad about yourself if you happen to go over-budget or steer off-course.

For some people, the fear of this happening may be enough to instill discipline and help them stick to their budget. However, for others, it may be enough to discourage and deter them. 

If the latter describes you, it may be better for you to use your budget as a guideline and a reminder that you have a certain amount of money designated to every category, encouraging you to put thought into your purchases and avoid incessant impulse buying.

However, if you find it helpful to see an overview of the exact amounts you are spending, you can entrust the help of several budgeting apps on the market. 

One favorite option is Mint, which is available in both the United States and Canada. The app comes with the ability to link directly with your bank account to analyze your transactions and alert you if you’re over-spending based on your limits.

Despite the abundance of personal finance and budgeting apps, your best bet is manually going through your expenses. Doing this allows you to see exactly where you’re overspending and could lead you to make more conscious purchasing decisions.

4. Work out a debt repayment schedule that inspires you

If you are grappling with debt, you are not alone. In fact, an estimated 73.2% of Canadian adults and 80% of American adults are carrying at least some outstanding balances, whether it be in the form of credit card debt or student loans.

Even though having debt is practically ubiquitous, there is still a degree of stigma that comes along with it.

Unfortunately, this stigmatization can creep into some of the more stringent debt repayment plans that you will come across online, giving an idealistic and unrealistic belief that nobody should carry any debt at any cost. They can often be impossible for the average person to match but can also be alienating and patronizing to an audience trying to better their financial situation.

Of course, this punitive approach can be disheartening to many folks, especially those who may come from low-income families who may struggle with a chronic illness that makes it difficult to work or simply grappled with life circumstances that affected their finances.

If you find that the stigma around the amount of debt that you are carrying is stopping you from making progress on paying down your debt, it might be worthwhile to sit down and draft a repayment plan that works for you on your timeline.

If you are looking for a place to get started, here are some of the most common ways of paying off your credit card. Remember to be kind to yourself and to celebrate the small milestones that await you in the journey of paying off debt.

5. Start saving for retirement early — even if it’s a small amount

Every once in a while, a thread on Reddit will pop up asking older generations to provide a word of advice for their younger counterparts. 

More often than not, the answers are usually the same: eat healthier, take better care of your body, and start to save for retirement as early as possible.

If you are just starting out in your career, it may be hard to start thinking about retirement. Likewise, if you find it hard to pay the bills every year, it may seem counterintuitive to delegate money to a place that does not have any pay-off in the short (or even medium) term. 

However, your future self will thank you, even if you contribute even $10 a week towards a future retirement fund.

The reason for this is because you are saving for something that is in the far future, you are able to accrue interest efficiently through an account that is designated for retirement savings (known as an RRSP in Canada, or a 401k in the United States).

If you would like to set up an automatic withdrawal for a retirement account, you may be able to do so through your bank. 

Otherwise, options like Wealthsimple work great for exactly this purpose. It’s a satisfying feeling to check up on your progress every so often and see how you are investing in your future!

Frequently Asked Questions

The answer to this question is personal! Instead of dollar amounts, let’s answer with a percentage. According to the popular budgeting philosophy of the 50/30/20 rule, 20% of your income should be spent on savings and debt. So, depending on the amount of debt you have, you should be putting up to 20% of your income towards your saving goals.

We’re glad you asked! In today’s technologically-driven age, it makes sense that “there’s an app for that”. Check out our review of the best budgeting apps.

What is this question doing here? Everyone knows that this refers to when you drop a french fry on the floor and pick it up right away. We kid — in the financial world, the “10-second rule” instructs you to close your eyes and count to ten before you make any purchase.

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