22 Top Recommendations for Creating a Sustainable Personal Budget
In the quest for financial stability, we’ve gathered the wisdom of Financial Advisors and CEOs to bring you their top recommendations for crafting a sustainable personal budget. From adopting the 50-30-20 budget rule to flipping the script with reverse budgeting, explore the diverse strategies shared by twenty-two finance-savvy professionals that could transform your fiscal health.
- Adopt the 50-30-20 Budget Rule
- Build an Emergency Fund
- Automate Savings for Clarity
- Cover Essentials Before Saving
- Prioritize Needs Over Wants
- Review and Adjust Budget Regularly
- Embrace a Frugal Lifestyle
- Set Concrete Financial Goals
- Track Expenses for Transparency
- Prioritize High-Interest Debt Repayment
- Track and Categorize Expenses
- Budget with Zero-Based Concept
- Create Sinking Funds for Expenses
- Save Early, Spend Mindfully
- Monthly Budget Reviews for Stability
- Embrace the 80/20 Budgeting Method
- Practice Mindful Spending
- Manage Money with Envelope System
- Start Small, Build Up Budgeting
- Pay Yourself First Strategy
- Audit and Cut Unnecessary Subscriptions
- Flip the Script with Reverse Budgeting
Adopt the 50-30-20 Budget Rule
Adopting the 50-30-20 budget rule is a straightforward method to manage your finances effectively. This rule suggests allocating 50% of your income to necessities, such as rent and groceries, which are essential for your day-to-day survival. Then, 30% of your income can be directed towards discretionary expenses, which include non-essential items and services that enhance your lifestyle.
Most importantly, the rule emphasizes the ‘ABS’ principle – Always Be Saving – by prioritizing the allocation of 20% of your income towards savings or debt repayments before any discretionary spending. If you find your budget deviating from this structure, it’s crucial to reassess your spending habits. Look for areas where you can cut back on discretionary expenses to realign with the 50-30-20 rule.
This disciplined approach ensures financial stability and gradual wealth accumulation over time. Remember, saving is not just about putting money aside; it’s about securing your financial future.
John Lysack, Financial Advisor, John Lysack Wealth Management
Build an Emergency Fund
My advice is to prioritize building an emergency fund as part of your budgeting strategy. Aim to save at least three to six months’ worth of living expenses in a separate, easily accessible account. Having an emergency fund has provided me with financial security, enabling me to handle unexpected expenses without derailing my budget. This buffer has been crucial in maintaining my financial stability during unforeseen circumstances. Knowing I have this safety net allows me to plan for the future with greater confidence and less worry.
Jeffrey Zhou, CEO & Founder, Fig Loans
Automate Savings for Clarity
One of the most life-changing things I’ve learned in my career as a CPA is that before you even sit down to make a budget for every month, you have to first automate savings and have these deductions out of the way. The reason why I advocate for this process is because it gives you an accurate picture of the disposable income you’re actually working with. There’s less guesswork (if any), and you’re not stressing about whether you’ve saved enough because it’s already taken care of. Then, you begin the actual work of budgeting with a clearer picture.
Personally, knowing exactly how much I could allocate toward everyday spending allowed me to cut down on using credit cards unnecessarily. It helped me live within my means and avoid debt. Plus, whatever I saved beyond my immediate needs was put to work through investments, which helped my money grow over time.
Paul Carlson, Managing Partner, Law Firm Velocity
Cover Essentials Before Saving
To me, the prime factors that can impact your budgeting strategy are your income and expenses. The difference between the two actually determines your savings. So, I tried to cover the necessary costs first, rather than transferring all my income to savings. My household budget consists of several expense categories, which I must pay off first. I pay off costs such as housing expenses, utilities, transportation, food, and primarily credit card/loan installments before transferring money to savings. Then, I calculated my total monthly spending and multiplied it by six to get the total figure for my emergency fund. Yes, it is equally important to include this category in your budget plan.
However, my wife prefers to follow the 50-30-20 budgeting strategy. She is also employed and contributes her share to household expenses and savings. She helps me ensure our financial security, as well as to keep up with our major financial goals. She contributes 50% of her income to pay off our mortgage and our kids’ college expenses. She contributes another 20% of her income to our emergency savings account. The remaining 30% she keeps for her personal expenses. Recently, she bought me a new camera; isn’t it wonderful!
By adopting this budgeting strategy, we can make better financial decisions and ensure that our cumulative family earnings are effectively channeled. This is very important for our long-term goals, as well as our immediate basic needs.
Lyle Solomon, Principal Attorney, Oak View Law Group
Prioritize Needs Over Wants
In my journey, crafting a sustainable personal budget begins with prioritizing needs over wants. By distinguishing between essential expenses and discretionary spending, I ensure every dollar serves a purpose. This discipline has been instrumental in achieving financial stability. It’s not about deprivation, but about conscious allocation, allowing me to save for the future while enjoying life’s pleasures responsibly.
Joe Ford, Co Founder, Dolphin Claims
Review and Adjust Budget Regularly
My top recommendation is to regularly review and adjust your budget to reflect changes in your income and expenses. Life circumstances and financial goals can change, so it’s important to revisit your budget periodically and make necessary adjustments. This practice has helped me stay on track and adapt to new financial situations smoothly. Regular reviews have kept my budget relevant and effective, contributing to my ongoing financial stability and success.
Roman Zrazhevskiy, Founder & CEO, MIRA Safety
Embrace a Frugal Lifestyle
Adopting a frugal approach has not only contributed to my financial stability but also enriched my life in countless ways. The biggest impact of embracing such a lifestyle is that it significantly reduces the likelihood of accumulating debt. When you avoid unnecessary purchases, you’re less reliant on credit cards or loans, which can lead to high interest charges and debt accumulation. This keeps your finances healthier and frees up more money for the important things in life. The money saved from living frugally goes directly towards my savings goals. Whether it’s building an emergency fund, contributing to retirement savings, or saving for a down payment on a house, increased savings provide a financial safety net and allow me to pursue long-term goals.
As for your budget, because you’re prioritizing essential spending and minimizing unnecessary purchases, you can allocate your money more effectively. For example, instead of dining out frequently, I enjoy cooking meals at home. But I’ll make sure I’m buying quality, gourmet ingredients and saving money on them by couponing and exploring store discounts. It’s not only more affordable, but it also allows me to experiment with new recipes and bond with family over shared cooking experiences. These cost-effective alternatives help me stick to my budget without feeling deprived.
I think the most important impact I’ve experienced over a decade of adhering to this way of life is that it promotes a more sustainable lifestyle. By consuming less and focusing on experiences, I can reduce my environmental footprint. This focus on mindful consumption aligns with long-term financial stability, as a healthy planet provides a more secure future.
Gary Gray, CEO, CouponChief.com
Set Concrete Financial Goals
Focus on finances by setting realistic, achievable, and concrete money-related goals, such as saving for a trip, creating an emergency fund, or eliminating a particular amount of debt within a timeframe.
With a clearly defined goal, budgeting has direction and purpose. Sticking to this advice has helped me stay focused and disciplined with my spending. This is particularly useful when you need to cut back from the previous month’s expenses in a way that moves you toward your goal. For instance, it helped me pay off my student loans faster, build a larger emergency fund, and save up for a house down payment.
Reaching these goals has made me much more solvent, with a greater sense of financial security, and I am gradually building financial assets to achieve my other, longer-term goals. By setting and reaching these simple targets continually, I have been able to drop and still stay just below the red line.
George Blandford, Co-Founder, UK Linkology
Track Expenses for Transparency
Creating a sustainable personal budget starts with understanding your expenses. Begin by tracking all of your expenses for at least one month to get an accurate overview of where your money is going. This can include everything from rent or mortgage payments, utilities, groceries, transportation costs, and any other monthly bills. Once you have a clear picture of your expenses, start creating a budget that reflects your income and allows for savings. By consistently tracking your expenses and sticking to a budget, you will be able to see where you may need to cut back on unnecessary spending and prioritize saving for future financial goals. This has been instrumental in helping me achieve financial stability, as it allows for a better balance of my income and expenses.
Brandon Beatty, Real Estate Investor, Ready House Buyer
Prioritize High-Interest Debt Repayment
I believe paying off high-interest debt should be your top priority when creating a sustainable personal budget. High-interest debts, such as credit card balances, can quickly spiral out of control, consuming a large portion of your income and hindering financial growth. By focusing on eliminating these debts, you free up more money for savings and investments, leading to greater financial stability. Following this advice has allowed me to build a strong emergency fund, invest more aggressively for retirement, and enjoy peace of mind knowing that I’m not burdened by high-interest payments. It’s a foundational step that paves the way for long-term financial health and security.
Michael Ashley, Founder and Finance Expert, Richiest
Track and Categorize Expenses
Creating a sustainable personal budget begins with tracking expenses and categorizing them. Setting realistic financial goals and adhering to them is key. Prioritizing needs over wants helps maintain balance. Consistently reviewing and adjusting the budget ensures its relevance. Following this advice has led to improved financial stability by providing a clear overview of spending habits and areas for improvement. It has empowered informed decision-making, enabling better allocation of resources and saving for future goals.
This approach fosters a sense of control and confidence in managing finances, contributing to overall stability and peace of mind. Regularly monitoring financial progress and celebrating milestones reinforces motivation and commitment to the budgeting process. Seeking out additional resources, such as financial literacy workshops or budgeting apps, can offer valuable insights and support in maintaining a sustainable budget over time.
Peter Reagan, Financial Market Strategist, Birch Gold Group
Budget with Zero-Based Concept
It is important to solidify a ‘healthy’ personal budget, and my number one suggestion is that you budget with the zero-based budgeting concept. This budgeting technique involves assigning every dollar you earn to some spending, saving, or investing category so that every dollar in minus every dollar out equals zero.
This will give you autonomy over your own finances and help you keep track of where you spend your money each month. It can help you spot inefficiencies that possibly are causing you to overspend and make appropriate changes. For me, nothing has helped me more than following a zero-based budget when it comes to my financial stability. This has taught me to have a structured way of arranging my money by saving, covering all my basic expenses, and investing on a regular basis.
It was through this budgeting method that I was also able to start an emergency fund and save money just for surprises. It has allowed me to make debt repayment a priority, decrease my liabilities, and contribute to my overall financial well-being. I have a much more stable financial life, and I feel more at ease since I started planning and managing my money more carefully.
Moulik Jain, Head of Marketing & Growth, CaptainBiz
Create Sinking Funds for Expenses
Establishing sinking funds for large, irregular expenses, such as vacations, car maintenance, or holiday gifts, can help manage your budget. By setting aside a small amount of money each month into designated savings accounts for these specific purposes, you can avoid the financial strain when these expenses arise. This strategy has helped me manage large expenses without disrupting my monthly budget. Creating sinking funds has provided me with financial peace of mind and ensured that I am always prepared for upcoming costs.
Shawn Plummer, CEO, The Annuity Expert
Save Early, Spend Mindfully
First of all, save money at the beginning of the month. Once your budget is slimmer, you’ll naturally be more reluctant to overspend and overstep your own barriers.
Once it’s done, make sure to split your money into a couple of smaller wallets, and then spend accordingly. So if you earn $5,000, you should put $1,000 into your savings account, and split the remaining $4,000. Dedicate $1,000 to groceries, $1,000 to rent, $500 for pleasure, $500 for well-being, etc. Knowing you have a specific budget, you won’t be willing to spend more than that, and everything ‘extra’ can be moved to the next month or additional savings.
Being a student who started from minimum wage, this approach helped me survive the first few months of living on my own and build up certain capital across the 4 years of studying, which allowed me to buy a decent PC, get myself a car, and rent a bigger room.
John Kawecki, Marketing Manager, F1 Blast
Monthly Budget Reviews for Stability
Regularly reviewing your budget is crucial to ensure it remains relevant and effective. Set aside time each month to assess your income, expenses, and financial goals, and make adjustments as necessary. This practice has allowed me to stay on top of my finances and quickly address any issues or changes in my financial situation. Consistently reviewing my budget has helped me stay aligned with my financial goals and maintain long-term stability.
Phil Strazzulla, Founder, SelectSoftware Reviews
Embrace the 80/20 Budgeting Method
To forge a personal budget that lasts, the 80/20 budgeting method is key. Allocate 80% of your income to essentials and savings, leaving 20% for your personal whims. In my experience as a Project Manager at Japan-101, this tactic has been vital for maintaining a steady financial course through the ups and downs of project cycles. It’s about giving priority to what’s crucial, ensuring a solid fiscal base that can absorb shocks with ease. And it’s not all work and no play; this strategy allows for enjoying the finer things in life, but with a sense of measure, fostering a financially healthy and fulfilling way of living.
Stanley John Kebite, Project Manager, Japan-101
Practice Mindful Spending
Practicing mindful spending by being conscious of your purchasing decisions and their impact on your budget can lead to better financial management. Before making a purchase, take a moment to consider if it aligns with your financial goals and if it is a necessary expense. This approach has helped me make more intentional and thoughtful spending choices, reducing impulse buys and unnecessary expenses. Practicing mindful spending has led to better financial management and has contributed significantly to my overall financial stability.
Sergey Taver, Marketing Manager, Precision Watches
Manage Money with Envelope System
The envelope system is a cash-based budgeting method where you allocate specific amounts of cash to different spending categories and place them in labeled envelopes.
I started using this system to control my discretionary spending and ensure I didn’t exceed my budget in any category. This tangible approach has made me more mindful of my spending habits and improved my financial discipline. Using the envelope system can provide a hands-on way to manage your budget and avoid overspending.
It also adds a physical element to budgeting that can be more effective for those who struggle with digital tracking, making spending limits feel more concrete and easier to adhere to.
Tom Golubovich, Head of Marketing, Ninja Transfers
Start Small, Build Up Budgeting
Start extremely small and build your way up quickly. Budgeting is tough work, and the only real way to success is to stick with it over the long term. A few months of extreme deprivation are a drop in the bucket—consistent efforts and slowly curtailing spending are what make a real difference in your financial security.
I started off by simply tracking my spending over months without beating myself up over how I was spending. When I felt comfortable with budgeting, I found one expense easy to cut down on and focused my efforts there. Over time, I repeated those efforts until I consistently reached my spending and savings goals. Of course, there’s only so much you can cut down, so if you have a deficit even after you’ve changed your habits, it’s time to look for a role that earns more or start exploring side hustles.
Holgar Sindbaek, Founder & CEO, World of Card Games
Pay Yourself First Strategy
Adopting the “pay yourself first” strategy ensures that savings are prioritized before any other expenses. Each month, I automatically transfer a portion of my income into my savings account before paying bills or making any purchases. This habit has helped me consistently build my savings and stay committed to my financial goals.
Prioritizing savings over discretionary spending can significantly enhance your financial health and future security. Over time, this approach can help you build a substantial emergency fund and make progress toward long-term financial goals, such as buying a home or retiring comfortably.
Alan Parkes, Owner, Roofcorp
Audit and Cut Unnecessary Subscriptions
Limiting unnecessary subscriptions can significantly improve your budgeting strategy. Regularly audit your subscriptions for services such as streaming, magazines, or gym memberships, and cancel those you no longer use or need. This simple action has helped me reduce monthly expenses and free up funds for more important financial goals. By being mindful of subscription services, I have been able to cut out wasteful spending and better allocate my resources.
Axel Lavergne, Founder, reviewflowz
Flip the Script with Reverse Budgeting
One method I recommend for creating a sustainable personal budget is Reverse Budgeting. This approach flips the traditional way of budgeting. Here’s how it works:
It all starts with the basics—tracking your income and fixed expenses. Begin by listing your monthly income and fixed expenses like rent and utilities. This step is important as it gives you a clear picture of your non-negotiable costs, forming the foundation of your budget.
Savings Goal First: Set a specific savings goal, like building an emergency fund or saving for a vacation. Allocate money toward this goal each month before considering other expenses.
Remaining Amount: The money left after accounting for fixed expenses and savings is your flexible spending money. You use this for groceries, entertainment, and other variable costs.
I’ve used Reverse Budgeting to prioritize my savings, and it’s been very effective. Focusing on savings first, I’ve built a safety net and avoided impulse purchases. It helps me live within my means and ensures I’m always moving toward my financial goals.
Burak Özdemir, Founder, Online Alarm Kur
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