5 Simple Budgeting Guidelines to Follow

Overwhelmed by the idea of budgeting? These guidelines simplify the process

Close-up of woman's hands on calculator
••• Nick White / Getty Images

When most people think of budgets, they automatically think of spreadsheets with line items. Unless you're the type of person who loves spreadsheets, creating and maintaining a budget doesn't sound like fun.

If you’re interested in budgeting, I have some great news. Your budget doesn’t need to focus on the little details. It doesn't need 15 different categories.

Furthermore, it doesn’t have to be based around deprivation. You can allow yourself a little bit of fun within the context of your overall budget. In fact, if you don’t like the word budgeting, then replace it with the idea that you’re creating a plan or a roadmap around how you’re going to spend your money.

You wouldn’t drive from Boston to San Francisco without using a map or some type of navigation, would you? Then why would you navigate your finances without using some type of a roadmap?

Are you on board with budgeting now? Here are five general guidelines you can follow as you put together your first budget:

Less is More

A common rookie mistake is to overload your budget with endless categories. You don't need to include how much money you’ll spend on nail polish, on hair, on gasoline, on magazine subscriptions, or on new socks. Nobody needs that level of detail. The fewer categories, the better.

At the far end of the extreme, your budget could have as few as two or three categories. The anti-budget or the 50/30/20 budget work better with less. A side category budget works well, too.

Be Realistic

If you’re currently spending $400 per month on groceries, don’t assume that next month you’ll be able to crush this down to $100 per month.

Instead, set incremental goals. If you spend $400 on groceries this month, try spending 5-10% less next month. This results in spending between $360 to $380 on groceries. 

Do that for a month or two and then adjust further down from there. Eventually, you'll reach the $300 mark. Small incremental changes over time are more sustainable.

Don’t Force Yourself to Use the Latest Fads

Lots of people turn to software or apps to manage their money. If this comes naturally to you and you enjoy these tools, that’s fantastic. But don’t be afraid to resort to old fashioned paper and pen if that’s what you prefer.

There’s no right or wrong way to manage your budget. The key is to find whatever works for you, regardless of whether that’s an app, a spreadsheet, or a pencil and envelopes.

Initiate Weekly Family Conversations

You’re probably not the only person who spends and saves within your household. Plan weekly meetings with your family to include everyone in the decisions you make with your budget.

Review your major overarching goals, such as building an emergency fund or maxing out your retirement account. Talk about the "why" behind every spending decision, too.

Your family might not like the fact that you’re buying a cheap, used car instead of the latest model. However, they’ll understand this decision when it’s framed in the context of making a bigger contribution to your child’s college savings fund.

Adjust Your Budget Every Month

Realistically, your budget is going to have two columns: the amount you intend to spend every month, and the amount you actually spend.

As you evaluate your budget each month, you’ll notice how reality diverges from the best-laid plans. When you see the results of your spending, you’ll know where your problem areas are. Review these areas and make adjustments accordingly.

When I started budgeting, I discovered I was spending a lot more money at Target and on Amazon than I had realized. Thanks to reviewing my spending, I became much more conscientious about shopping. Before that, I couldn’t walk into a Target without escaping at least $50 poorer. These days, I can easily walk into a Target, grab one item, and leave. The only reason I can do this is that the budget brought this issue to my attention.

Most importantly, you should maintain an upbeat attitude. Even if you only make one minor improvement every month, those improvements will add up to a major life shift over time.