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Good news: If you’re wondering how to stick to a budget, you’ve already taken the first important step by recognizing the need for one. But don’t celebrate just yet. A budget is only useful if you actually follow it. Here’s a straightforward approach to ensuring your spending aligns with your financial goals.
UNDERSTAND THE BASICS. A personal budget is tailored to each individual, meaning no two budgets will look exactly alike. However, there are a few fundamental guidelines that financial experts often recommend as a starting point. A key principle is the 50/20/30 rule. Under this system, 50 percent of your after-tax income should cover your basic necessities such as housing, utilities, food, and transportation. (This rule still applies even in expensive cities like New York: If your rent is high, maybe the upside is you don’t need to own a car to get around.) The next 20 percent should be saved, including paying off debts, contributing to your 401(k), or other savings plans. The remaining 30 percent is yours to spend however you like. But keep in mind that this category now covers a lot—your phone bill, streaming subscriptions, clothing, travel, and social outings all count here.
BE HONEST ABOUT THAT 30 PERCENT. If you’re a big foodie and think you’ll cut out dining out completely, that’s probably unrealistic—especially when you pack sandwiches for one week and then quickly abandon the plan. So start by evaluating your spending habits and find areas where you can trim down. It’s important to allow yourself some fun, so maybe dine out only once every two weeks instead. On the other hand, if gadgets aren’t a priority for you, perhaps buy a second-hand phone to cut down on your monthly payments, and reallocate that savings toward something you value more or increase your savings target. You can always exceed the 20 percent savings guideline, but try to keep the 50 and 30 percentages intact.
TRACK YOUR SAVINGS. There’s no harm in using a little self-motivation if it helps you stick to your budget. A recent personal finance study showed that 77 percent of people who met their savings goals stayed motivated by calculating how much money they would save over the course of the year. Every time you skip that morning coffee, add a few bucks to your savings. If you cut down from having three lattes a week to just one, you’ll pocket an extra $520 by year’s end.
SET A LONG-TERM GOAL. Dreaming of hiking the Appalachian Trail or relaxing for a weekend in Puerto Rico? Planning to start your own small business? Keep those dreams alive—they matter. Research shows that having a long-term goal helps people resist short-term temptations, allowing them to save more money and avoid impulsive purchases.
SHOP AROUND. You can save money on almost any essential item by comparing prices. Sales and discounts often mean that the brand of the cheapest product, like toilet paper, shampoo, or bread, will vary. So be flexible and savvy. Don’t hesitate to use your calculator while grocery shopping. Or better yet, check the unit price listed on the label to see the cost per ounce, so you won’t be tricked by fancy packaging and can get the best deal.
TEAM UP WITH A SAVINGS BUDDY. Saving is easier when you have someone to support you. A 2016 study revealed that having a partner with good money habits significantly improved a college student’s financial health. In fact, the financial behavior of their romantic partner influenced them more than their parents did. The same idea holds true for friendships—having a money buddy can make it easier to stay accountable and stick to your financial goals.
Along with identifying your financial priorities, it’s crucial to know where you stand. Fortunately, Discover’s free Credit Scorecard is available to help. You can check your credit score for free, even if you’re not a Discover member. Visit Discover to learn more.
