Your budget is the centerpiece of your financial life: Everything you accomplish with your money is directed by your budget. Saving, paying off debt, affording your expenses and paying for the things you want all come down to your spending plan.
That's why, when you need to save more money, tweaking your budget is a strong place to start. Try these six practical budgeting tips to revamp your money management and put more in the bank.
1. Automate Your Finances
Few financial strategies are more efficient and satisfying than making money management automatic. You can use automation to stick to your budget and save more money. Here are some ways to automate your finances:
- Set up autopay for bills. Setting up automatic payments for your bills and debt payments helps ensure you're paying on time and avoiding late fees.
- Use a budgeting app. Downloading a budgeting app for your phone that automatically syncs to your bank account can help you track and categorize spending without any heavy lifting.
- Automate your savings deposits. Rather than transferring money into savings, set up automatic transfers into a high-yield savings account each pay period to make saving a habit by paying yourself first.
Find High-Yield Savings Accounts
2. Use Sinking Funds for Irregular Expenses
You can create sinking funds to meet any number of savings goals, from putting a down payment on a new car to going on an international vacation next summer. But you can also use sinking funds as a budgeting hack to "prepay" for irregular, non-monthly expenses.
For example, you could create sinking funds for your insurance premiums, holiday spending, college tuition bills, car repairs, home maintenance and more. The biggest benefit of doing this is that these expenses won't catch you by surprise. That can help you avoid dipping into your savings or taking on debt.
Another great type of sinking fund you can create to keep your budget intact and ensure you're not dipping into your savings is a budget buffer sinking fund. A budget buffer is cash you set aside to cover the difference when you spend more than you intended to. By ironing out small spending mishaps as they happen, you can avoid compounding any damage and keep your budget stable.
3. Put Budgeting on Your Calendar
If you set and forget your budget, you may miss out on opportunities to look for ways to realign your spending habits with your goals. That's why one key budgeting habit to save more money is to schedule regular reviews of your expenses, actual versus planned spending and your saving goals.
Try blocking off time every couple of weeks or once a month to review your budget. One way to go about it is to set up a payday routine. A payday routine is a set of steps you go through each time you get paid. Here are some items you could add to your checklist.
- Look back over your spending from the previous pay period to see if you stuck to your planned spending or if you went over budget.
- If you underspent last pay period, put the difference into savings.
- Look ahead at the coming weeks to see what major expenses are on the horizon.
- Do a review of your sinking funds and decide if there are any that you want to contribute to this pay period.
4. Try Out Budgeting Methods for Size
There are an abundance of budgeting methods you can experiment with until you find your perfect fit. One flexible method is the 50/30/20 method, which has you break up your spending into broad categories and allocate a certain percent of your pay to each.
More structured approaches include the envelope budget system―also called "cash-stuffing"―where you put cash in physical envelopes for different spending categories and saving goals. A modernized but similar approach is the zero-based budget, where you allocate all of your pay to spending, debt payoff and saving. Try out different systems to find the approach that fits your spending personality.
5. Pay Off Debt ASAP
For optimizing your budget to save the most money, one of the best moves you can make is to prioritize paying off high-interest debt. Use a debt repayment strategy such as the debt snowball method, debt avalanche method or the debt snowflake method.
Paying off credit card debt and loans not only saves you substantial money in interest over time, but once you pay off those balances, you can redirect your efforts to putting the money that would have gone toward your debts directly into savings.
6. Invest Your Money
Beyond budgeting for short-term savings goals (like an emergency fund, down payment fund, home renovation fund and any other cash you aim to keep fairly liquid), make sure you're saving for the long-term goal of retirement. Investing some of each paycheck in a 401(k) or an individual retirement account (IRA) can help you grow your money more over time.
One additional tip you can use to leverage your investment efforts further is to try upping your retirement contributions by a small, set amount each year. For example, you may be able to automatically increase your deferrals by 1% each year. Having 1% less of your pretax pay shouldn't cause too much budget pain, but it can pay off for your retirement savings long term.
Be an Agile Budgeter
One of the most important qualities of successful budgeting and saving is flexibility. We all set savings goals and write a budget with the best of intentions—then life happens. Paying yourself first can help, because money that never shows up in your checking account is money you won't be tempted to spend.
But beyond that, focus on pivoting to prioritize saving whenever the opportunity comes up. That may mean funneling windfalls into savings or debt payoff, for instance. It can also mean being flexible and reducing spending in one category to cover overspending in another category. That way, you won't have to sacrifice money you intended to save to cover spending. Ultimately, staying plugged into your budget on the regular by using a budgeting app and thinking frugally can help you trim your spending and save more each day.