Americans report gearing up to spend $923 on Christmas gifts this holiday season — just $19 below the all-time high of $942 reported in pre-pandemic 2019 — despite the fact that their spending power has been reduced considerably in the face of persistent inflation._[1]

Eye-watering figures when one considers that 49% of Americans have no or less savings than they did a year ago._[2]

Holiday debt is the gift that keeps on giving, but you don’t have to be the intended recipient.

If you’re looking for ways to enjoy the holiday season without breaking the bank, here are several cheery ways to celebrate Christmas on a budget. From making your own decorations to finding creative gift ideas, these tips will help you make the most of your holiday season without spending too much money.

1. Start by Listing Anticipated Expenses 

Having a topline figure in mind helps prevent spending creep, and serves as a psychological accountability partner. To get started, simply jot down a Christmas budget list of the common holiday expenses you may encounter. 

Possible Holiday Season Expenses:

Next, set reasonable boundaries for whom you may choose to buy gifts. Setting boundaries can help ensure that everyone involved in the gift–giving process is comfortable and that expectations are managed. Boundaries can also help to keep the focus on the spirit of giving, rather than on material possessions.

Possible Gift Recipients:

• Spouse
• Children
• Extended family members
• In-laws
• Nieces, nephews, goddaughters, and godsons
• Teachers
• Neighbors
• Bosses, coworkers, secretaries, etc.

When you’re budgeting for Christmas, the costs can add up quickly. Not all of these expenses will apply to you, but it gives a few examples of costs you might not have remembered. 

And while the average American household considers a Christmas budget per child of around $200 to be the norm, experts suggest far less. At just $75 per child, their suggestion is to invest in year-round core memory events as opposed to a once-yearly toy dump._[3]

As you consider the expenses you’re responsible for this Christmas, take a look at the next step.

Related: 5 Financial Mistakes to Avoid This Holiday Season

2. Create a Frugal Christmas Budget

The key to enjoying Christmas on a budget comes as a surprise to exactly no one — merely having a budget in place. Your completed Christmas budget will show you an overall picture of your projected costs and help you save money in the long run. In this step, you’ll assign a dollar figure to each anticipated expense to give you a clearer picture of how much you’ll be spending.

 

 

 

 

 

 

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Keep in mind that it might take a little bit of time to complete this step. For example, you might look up the cost of a professional photographer, but then realize you have the perfect selfie to put on your Christmas card instead.

Or, you might think you want to buy new Christmas decorations for your front lawn, but change your mind once you see the cost.

Spend some time doing a little research about the items on your list and try to come up with a total projected expense for the season. If you’re not comfortable with this total number, move on to the next step.

3. Find Ways to Lower Costs

You might be looking at your Christmas budget with fresh eyes and seeing a number you simply can’t afford.

Christmas might seem expensive, but it doesn’t have to be. Furthermore, you don’t have to go into credit card debt to make it a memorable and fun holiday season.

Here are some ideas to help you have an enjoyable Christmas on a budget: 

• Play a gift game. Many families now play games like a white elephant gift exchange or hot gift potato, which means they only have to buy one gift for the adults in their family. Suggesting this can save hundreds of dollars every Christmas. Plus, it’s a fun way to spend time as a family.

• Stick to the four-gift rule for your kids. Kids have so many toys these days. They can easily become overwhelmed, especially when the time comes to clean the playroom to make room for new toys. The four-gift rule says that you can buy your kids something they want, something they need, something to wear, and something to read. These four presents should be more than enough for them to enjoy their holiday season.

• Consider thoughtful Christmas gifts on a budget. Budget Christmas gifts are great for teachers, co-workers, and neighbors. If you’re a crafty person, take a shot at some homemade gifts. A nice letter and a $5 Starbucks gift card can also go a long way. Teachers love gifts that are from the heart – a thank you note from your child would go much further than another coffee mug or candle.

• Have a potluck. Even if you love hosting Christmas dinner, you don’t have to pay for the entire meal. Ask your guests to bring a dish.

• Use coupons and shop at discount stores. T.J. Maxx and Marshalls are ideal stores for you to shop for gifts. They have amazing name brands at affordable prices. You can also use coupons when shopping online. DollarSprout Rewards allows you to save on gifts in a multitude of ways. You’ll earn up to 10% cash back (or more) at 10,000+ popular online merchants. Walmart, eBay, Kohl’s, Macy’s, you name it. Wherever you do your Christmas shopping you’ll be sure to earn cash back on your purchases.

Related: 75 Creative Ways to Save Money Around the House

4. Look for Ways to Make Extra Money

Of course, you can only cut your budget so much. If you’ve done everything you can to lower the cost of your Christmas expenses but you’re still coming up short, it’s time to hustle. Here are a few ways to earn more money for Christmas spending. 

• Deliver food. Get paid to make deliveries on your own schedule. People don’t like going shopping when it’s cold and snowy outside, so now is a great time to start this side job.
• Complete microtasks. Not everyone has a ton of extra time to commit to a second job or even a fully involved side hustle. Micro job sites allow users to find and complete simple tasks for cash. From spotting errors on websites and data entry to product reviews and feedback, most tasks can be completed in 1 hour or less.
• Sell last year’s gently used gifts. Getting rid of some of your old gifts can help pay for this year’s presents. If you have an old cell phone lying around, try selling it on Decluttr. Once your tech is evaluated, you’ll get same-day payment via PayPal or with a check sent by mail.
• Shovel snow. If you live in a cold climate, there are lots of people who will pay you to shovel their driveway when it snows. Start with your neighbors and friends first.
• Work retail. Many stores hire extra employees during the holiday season. It’s a short period of time, but you can earn extra money and score discounts at your favorite stores.

Related: 15 Festive Ways to Make Extra Money for Christmas 

5. Take advantage of seasonal offers

Stores are clamoring over customers during one of the busiest shopping seasons of the year. In doing so, they’ll offer generous rewards, cash, or steep discounts just to get you in the door. Along with earning more money, you can also find ways to earn gift cards for free. Use the gift cards to buy your Christmas presents or give them away as gifts. 

Some easy ways to snag free gift cards include: 

1. Collect Swagbucks. New members get a $10 sign-up bonus. When you build up your supply of Swagbucks by taking surveys, watching videos, playing games, and more, you can redeem them for gift cards to your favorite retailers.
2. Take online surveys with Survey Junkie. When you cash out the money you’ve earned from completing surveys, you can get paid in a variety of gift cards.
3. Sign up for InboxDollars. Earn a $5 bonus for signing up, which you can get in the form of a gift card to one of dozens of major retailers. Every time you shop online, take a look at current deals and earn cash back for purchasing items on your list.

Remember, Fun is Free

Even though Christmas can get expensive and you might feel pressure to buy many people gifts, remember that fun is free.

You don’t have to spend money that you don’t have this holiday season. Christmas is about spending time with family and friends. There are so many frugal and free activities you can do that will bring you closer together.

You can volunteer at a soup kitchen and help the needy. Spend an afternoon baking bread and cookies with your children. Take a drive and look at Christmas lights. Surprise your grandmother and her friends at the nursing home. Create a silly Christmas dance choreography and teach it to your nieces and nephews.

Related: 10 Christmas Gifts You Should Never Buy for Someone

The post 5 Cheery Ways to Enjoy Christmas on a Budget appeared first on DollarSprout.

But making a budget can be difficult, especially if you’re not tech-savvy and don’t like updating spreadsheets.

The cash envelope method can help people who want an easy, low-tech approach to budgeting. It doesn’t require you to register for any apps or pay for software. All you need to get started are some mailing envelopes, a pen, and your cash.

Not only is it inexpensive to use, but this system can help curb your spending and keep you on track. That’s because studies show that consumers spend more when using credit cards compared to paying in cash._[1]

Using cash envelopes can be the easiest budget to use, especially if you find yourself frequently overspending.

What Is the Cash Envelope System?

The cash envelope system turns the budget you made from an abstract concept to a tangible one with the use of physical envelopes. It’s been around a while but was popularized in the last few years as an instrumental part of Dave Ramsey’s Baby Steps.

The way it works is you withdraw a fixed amount of cash from your bank account and divide it into categorized envelopes based on how much you’ve budgeted for each item.

Label each envelope with budget categories such as groceries, restaurants, gas, and entertainment. The only categories you should use envelopes for are the ones where you normally pay, or could potentially pay, in cash. For example, if your utilities are usually paid online, you would continue to pay those directly from your bank account.

How to Use Money Envelopes

One of the big advantages of the cash envelope system is that you can only spend what is in your designated envelope for that month, week, or pay period. To make the system work, you stop spending money from that category when the envelope runs out.

1. Choose your cash envelope categories

There’s no right answer for which categories are best to use for your cash envelope system. It’s important that you tailor the system to your needs, and you should do whatever makes sense for your financial situation.

One practical way to get started is to pick a few categories where you have problems staying on track with your spending and use those for your cash envelopes. For instance, if you tend to go over your dining out budget, you can do a cash envelope just for that line item. Start with a couple envelopes and add more as you get the hang of the system.

2. Decide on your envelope amounts

How you budget the money in the envelopes depends on your paycheck frequency or your overall budgeting strategy. If you get paid twice a month, you can fund your cash envelopes when you get your paycheck.

For example, if you budget $400 a month for groceries and get paid twice a month, you’ll put $200 in the grocery envelope each paycheck. If you get paid weekly, you would put $100 in the envelope every week.

Base your envelope amounts on your current budget. Try to account for any extra or irregular spending such as lunch out with a friend so you have enough money available.

Related: How to Save Money on Groceries

3. Set up your envelopes

Once you’ve decided on the amounts for each category, it’s time to set up your envelope budget system. All you need are envelopes and something to write with.

You can buy a box of envelopes from the dollar store and write your categories on them. Using color-coded envelopes makes this system a little easier and more enjoyable. If you have construction paper around the house, you can try to fashion your own simple envelopes.

Since many greeting cards come with different color envelopes, you can also collect some from the next round of birthday or holiday cards and use them as your cash envelopes.

Once you have your envelopes, put the allocated amount of cash into each one. Try to keep all of the envelopes in one spot in your house, preferably near your keys or purse. This way, you remember to take them with you when you leave.

4. Spend your cash

Once you have your cash envelope system set up, you’re ready to spend the money. For many people, this is the most difficult part at first because you can only use the funds inside your envelope for their designated purpose.

You’ll need to get in the habit of planning so you can have the right envelope on hand. What happens if you head to the grocery store and forget your envelope in the car? Instead of borrowing money from a different envelope, or using your debit or credit card, go back and get the right one. This system only works if you adhere to it.

When doing an activity or buying groceries, track your expenses. Check your envelope before you leave the house to see how much cash you have left. As you’re putting items in your grocery cart, keep a tally with a calculator. Staying on top of your purchases will prevent you from having to put things back when you get to the checkout lane.

It’s also handy to keep the receipts in each envelope so you know where the money went. This is good for staying on track, and it can help you figure out where you’re spending your money and how to budget accordingly.

It’ll take practice, but once you get it down, using your cash envelopes will be second nature.

Pros of the Cash Envelope System

In addition to being simple to set up and use, there are several benefits to using the cash envelope system.

Stay on track with your budget. Because you can only spend the money inside each envelope, the cash envelope system helps you stick to your budget. You won’t go over budget unless you cheat the system.

Fewer overdraft charges. Staying within your budget also helps prevent overdraft charges. Since you’ve already planned out your spending for the month, you know you have the money in your account and envelopes to cover your bills.

Helps curb overspending. If you struggle with overspending, cash envelopes can often help this issue. You can only use what’s inside each envelope, and you can’t borrow from other envelopes, which keeps overspending in check.

Forces discipline. Only spending what’s in your envelope takes discipline and restraint. You may notice once you use cash envelopes that this translates to the rest of your finances, helping you cut back on spending in other ways.

The habits you develop from using the envelope system build on each other. If you’re looking for a way to change your behavior with your money, this is a good method to try.

Cons of Using Cash Envelopes

While there are plenty of positives to using envelope budgeting, the system is not for everyone.

Can be inconvenient. Carrying several envelopes of cash around can be awkward. You need to make sure you always have the right envelope with you. Also, there are some retailers that don’t take cash, which can be a problem.

Confusing at first. Another downside is that using cash only can be confusing when you first get started. If you have several envelopes, you will have to juggle them and make sure you’re using the cash from the correct one. That’s why it helps to make the envelopes look different. Put food stickers on the grocery one or make the entertainment one a fun color.

No credit card rewards. Using the cash envelope system means you won’t earn credit card rewards on your purchases. If you’re used to getting airline miles, hotel points, or cash back, this can be a major drawback.

Hard to keep track. While you can only spend what’s inside each envelope, you may forget to keep track of how you spent it. This means you may have a difficult time figuring out where your money went at the end of each month, especially if you’re not good at remembering to save receipts.

Everyone must be on board. If you have a significant other, they would have to agree to use the envelope system. This means that if you ask your spouse to make a grocery run, they would need to remember to bring the cash envelope to pay for the purchase. If they forget, you risk going over budget or even overdrafting your account.

If you’re looking for a convenient budgeting system that easily tracks your spending, the cash envelope method might not be for you.

 

 

 

 

 

 

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Cash Envelope System FAQs

Cash envelopes can be a difficult system to use, especially if you’re used to swiping your credit card everywhere you go.

What happens if I spend all my cash?

If you spend all of your cash, then it’s gone. It can be tempting to shuffle cash between envelopes if you spend more in one category over another, but for this system to work, you can’t borrow from other envelopes.

There’s also no cheating by using a debit or credit card. The point of using cash envelopes is to stay on budget. This means you’ll need to make a plan and ensure you have enough to cover your needs for that month.

If you run out of restaurant money, you don’t get to go out. Just say no and eat leftovers or invite your friends over to your house. Running out of gas money? Limit your trips, run errands on a bike, ask to go with a friend, or carpool to work. Figure out creative ways to stretch your money when you’re running low on cash.

Can I still use cash envelopes if I do everything online?

Using this system works best when you can pay cash for goods and services. If you do everything online, you can still use the concept, but it requires more discipline.

You can use envelopes to track how much you spend in each category. Write the amount you have budgeted for the month at the top of your envelope and itemize each purchase underneath. It’s like balancing a checkbook. Just subtract each purchase from your balance.

What if I have money left over at the end of the month?

Having money left over in your envelope at the end of the month is a great feeling. You can either roll the money over into next month’s budget or splurge on something fun.

It’s OK to reward yourself by going to the movies or buying a new shirt if you have money left over. This will keep you motivated to stick to your budget and only spend what you have set aside for each category.

Celebrating the little wins along the way has a positive psychological effect. It will help you keep going even when you’re frustrated and want to give up.

Related: 8 Best Budgeting Apps For Every Type of Budgeter

Money Envelopes: The Enemy of Overspending

When you use a credit card, it can be easy to swipe and forget. Looking back at your statements, you may wonder where your money went each pay period. With cash envelopes, you know that whatever you spent was already part of your monthly budget plan.

They provide a physical way to curb overspending by limiting your funds to only the budgeted amount in each category. This makes it a great way to teach yourself discipline and stay on track financially. Cash envelopes may seem like a simple idea, but they can be a powerful way to take control of your spending.

The post What Is the Cash Envelope System and How Does It Work? appeared first on DollarSprout.

Do you choose a 50/30/20 method? Should you use cash envelopes? The range of options can make it harder for beginners who don’t know which method will work best for them.

One of the most common types of budgeting is a zero-sum budget or a zero-based budget. It’s also one of the simplest and most straightforward ways to budget your money. This is how I budget my money, and I find it works really well.

If you’re new to budgeting and want something simple and easy to start with, consider using a zero-based budget.

What is a Zero-Based Budget?

A zero-based budget is a budget where you assign every single dollar a job, even if you have “leftover money” after paying bills. This ensures that your monthly expenses equal your monthly income. With this budget, every single dollar you earn goes toward a purpose.

Just because every dollar has a job doesn’t mean you spend every dollar you earn. Rather, some dollars will go toward expenses and others will go toward paying down credit card debt, adding to your emergency savings, or another financial goal.

This type of budget is a more mindful approach because it makes you think about every dollar and forces you to confront your spending habits.

Zero-based budgeting encourages you to create a budget that incorporates spending and saving. You’ll have some expenses that are fixed, like your mortgage or rent or car payment. But when it comes to variable expenses, like your grocery bill or your clothing budget, you’re more likely to think about what you really need and can afford.

To see it in action, check out our zero-based budget calculator below:

Example of a Zero-Based Budget

Here’s an example of how a zero-based budget actually works. You can use this as a guide to create your own spreadsheet, or you can use our zero-based budget calculator to get started. Just modify the categories and amounts to fit your spending and expenses

Benefits of Budgeting to Zero

There are numerous benefits to zero-based budgeting. Because every dollar is accounted for, you’re less likely to waste money. This can help you reach your financial goals much faster because you know where your money is going.

Every dollar has a purpose

In a zero-based budget, every single dollar has a purpose. If you aren’t sure how much you’re spending each month, this is a great place to start. It’s also helpful if you’re trying to get out of debt and need to allocate extra money toward your debt payments.

When every dollar has a purpose, you have better control over your money. You can effectively spread your money out between monthly necessities and long-term financial goals.

Helps to identify spending patterns

Without a budget, you might not be completely aware of what you’re spending money on. A zero-based budget forces you to face where your money is truly going and evaluate whether that decision aligns with your values and financial goals.

I made the mistake of finding out how much money I spent at Starbucks last year. Let’s just say, I haven’t had any Starbucks since the new year started. We all have our little vices, and when you pay close attention to a zero-based budget, you’re more likely to make better decisions.

You also have the ability to choose what’s more important to you — daily Starbucks drinks or a nice date night, for example. Whatever you decide, this budgeting exercise gives you a reason to evaluate the tradeoffs you make with your money. And this ultimately will lead to better financial decisions overall.

Reach your goals faster

A zero-based budget can be a great tool to help you reach your financial goals faster because it encourages you to be consistent and clear about where your money goes.

For example, if you’ve assigned $300 to the “pay down car loan” category, you’ll be less tempted to use the money for something else. When you can be consistent about payments or savings over time, you’ll reach your goals faster.

Downsides of Zero-Based Budgeting

Zero-based budgeting can be an amazing tool to achieve financial stability, but it also has some downsides. If you’re the type of person who struggles to stick to a budget, consider these challenges before choosing this budgeting system.

It can feel restrictive

Unfortunately, a zero-based budget can feel restrictive at times. You have to decide how all of your money will be used for the whole month before it even begins, so it’s easy to get frustrated when you need to address the unexpected.

Perhaps you only make it halfway through the month before you’ve spent your entertainment budget. Then a friend invites you to a big birthday outing where you have to pay your own way. You can rebalance the budget and borrow from another category, but if this type of restriction will bother you, then the zero-based budget may be a challenge.

Difficult to handle emergencies

When every dollar has a job, unexpected expenses can put a dent in your financial plans.

You can set aside a sum of money each month for unexpected expenses or emergencies, but these can still be hard to predict. Months can go by without any major surprises, and then suddenly your car needs a new transmission.

You can handle this by allocating money to an emergency fund each month and drawing on that fund when large, unexpected expenses occur. Look at your unexpected expenses over the last year or so to calculate how much to put into your emergency fund.

Time consuming at first

When you’re trying to get the hang of zero-based budgeting, it can be extremely time-consuming. You’ll have to monitor your spending throughout the month and record which expenses go into which category. You might even end up tracking your spending every day.

Instead of manually tracking your expenses, you can always use a budgeting app. You Need a Budget is probably the most well-known, and it’s based on zero-based budgeting principles. It also teaches you to live on last month’s income, which is great for people who have a variable income or are self-employed.

Mint and Personal Capital also allow you to set a budget and track your expenses in various categories.

Some people like to track their expenses without an app and prefer to use a spreadsheet or notebook. They claim that it’s easier to truly see how you spend your money.

How to Make a Zero-Based Budget

Making your own zero-based budget may sound time-intensive, but it’s a useful exercise for anyone new to budgeting.

1. Figure out your monthly income

First, you’ll need to add up all of your monthly income. This can come from a variety of sources, including:

• Wages and tips
• Freelance payments
• Stock dividends
• Sale of investments or property
• Tax returns
• Rental income
• Royalties
• Child support and/or alimony

If your income varies from month to month, look back at least six months to capture a realistic average monthly income.

2. Start with regular expenses

Next, list your regular expenses. This includes all expenses you’ll incur every month. It should cover things like:

• Mortgage or rent
• Utilities
• Gas, tolls, parking or public transportation pass
• Groceries
• Childcare
• Cell phones
• Insurance
• Car payments
• Memberships and dues
• Subscriptions

3. Add your sinking funds

After you’ve listed your monthly expenses, add your sinking funds. A sinking fund is savings set aside money toward an expense that doesn’t occur monthly. To prepare for infrequent expenses, you’ll need to create sinking funds for any irregular items such as:

• Car insurance payments (every 6 or 12 months)
• Property taxes (yearly)
• Christmas (yearly)
• Income taxes (yearly)

A sinking fund ensures that you have the money you need when you need it, which is especially important when it comes to expenses like insurance and taxes.

4. Plan for your goals

Now it’s time to think about your family’s long-term financial goals. Start putting aside money for the things that matter to you. Remember, even if you allocate just $50 to each category every month, the money will add up when you’re consistent.

You can save toward goals like:

• An emergency fund for surprise expenses
• Paying off credit card debt, car loans, or student loans
• Going on a vacation
• Making a down payment on a house
• Remodeling your house
• Sending your children to a private school or college

You can put all of your savings into one account or set up sub-accounts for each goal. The latter might make more sense, particularly if you’re saving for multiple goals at once.

5. Budget to zero

Now that you know your monthly income and have a list of your expense categories, assign every dollar of income to an expense.

Cover your fixed expenses first. There won’t be any wiggle room in your mortgage and car payments, so you know precisely how much to allocate.

For variable costs, you may be able to find creative ways to reduce those expenses. For example, you can save money on groceries by using cash-back apps or call your phone service provider to ask if there are any deals you could be taking advantage of.

Next, consider how much money to put into your sinking funds. For many of these funds, you can’t be short on cash when you need it, so add a buffer.

For example, look at your property taxes over the last few years. Suppose you paid an average of $1,000 per year in property taxes over the last three years. Add a buffer, and plan to have $1,200 in your property tax account at the end of the year just in case. This means you need to plan to add $100 to this sinking fund each month.

For sinking funds related to taxes, you should include a buffer since you don’t want to be short. A sinking fund for something like Christmas has a little more leeway.

Finally, allocate the remaining income to your financial goals. Even if you can only save a little each month, it will feel great to put $25 into the vacation fund or $50 into the kitchen remodel account.

6. Track and adjust

Once you create your budget, start tracking your expenses. If you find that you’re consistently over in one area, think about adjusting your budget. You’ll have to take money from one category to increase the budget for another category, so think carefully about where you can reduce your spending.

As mentioned, You Need a Budget, Mint, and Personal Capital are all great apps for tracking your budget and expenses. If you’d rather go old-school, a simple spreadsheet from Excel or an app like Tiller could also work well.

7. Get a month ahead

Once you get in the routine of using your zero-based budget, try to plan a month ahead and have the entire amount you need for the month in your bank account on the first day of the month.

It might take a little while to get there if you’re living paycheck to paycheck, but you’ll have peace of mind if you can make this happen.

Zero-Based Budget FAQs

Making a zero-based budget can be confusing if you’re new to budgeting or have more experience using another system, like the 50/30/20 budget.

Can I make a zero-based budget if I have irregular income?

Yes, you can. If anything, it’s a preferred method if you have irregular income.

Try to build your budget around a lower income than you plan on receiving so you always have wiggle room in case a payment is late or you make less than planned in tips.

Do I need to use a spreadsheet for a zero-based budget?

You can use your own spreadsheet or a digital system like Mint or Tiller. That’s the beauty of a zero-based budget. It might take some time to figure out the best system for you, but there are a variety of options to choose from.

What if I have money left over?

If you have money left over, allocate it to your next financial goal. You can decide where this money will be of the most value to you, whether that’s paying off debt, padding your emergency fund, or moving you that much closer to your next vacation.

The Zero-Based Budget Is Worth Your Time

It takes some time, but a zero-based budget is worthwhile if you have big financial goals or if you’re just getting started budgeting. It can help you rein in your spending or pinpoint areas you need to work on.

The zero-based budget is also helpful if you tend to spend any extra money you have left over at the end of the month. This type of budget means every dollar has a specific purpose that you designate.

By helping you planning ahead and aligning your expenses with your income, you’ll be able to make positive steps toward both short- and long-term financial goals.

The post How to Make a Zero-Based Budget in 7 Simple Steps (with Example) appeared first on DollarSprout.

They know it’s important but they shudder at the thought of actually doing it. And just like with calorie counting, once someone starts sticking to a budget that suits their lifestyle, they start seeing positive results.

Budgeting apps — much like food tracking apps — can make this process easier. Once you find the right tool for you, you’ll start to see a substantial improvement. 

To help you find your perfect match, we’ve carefully sorted and tested dozens of apps to find the best budgeting apps for every type of budgeter.

Overview: The Best Budget Apps

1. Best for Overall: Tiller
2. Best for Automatic Tracking: Mint
3. Best for Keeping It Simple: PocketGuard
4. Best for Zero-Based Budgeting: YNAB
5. Best for Envelope System Budgeting: EveryDollar
6. Best for Couples: Honeydue
7. Best for Tracking Net Worth and Spending: Empower (previously Personal Capital)

1. Best Overall: Tiller

Price: 30-day free trial then $79/yr ($6.58/mo)

A common complaint of many budget tools is that they are too rigid and don’t give users enough flexibility to customize certain parts of their budget. For users who want a higher level of control and prefer using spreadsheets over cookie-cutter apps, Tiller is a great solution.

Tiller automatically updates a customizable set of up to five spreadsheets with daily spending, transactions, and balances from all your accounts including credit cards, loans, and bank accounts. Users can opt for either Google Sheets or Excel and can use Tiller’s Autocat feature to automatically categorize their spending. 

Flexibility (without the headache of data entry) is the biggest selling point for Tiller. The tool supports multiple budgeting methods, including 50/30/20 budgeting and zero-based budgeting, among others. You can also receive a daily email with account balance summaries and create spreadsheets to track savings goals, freelance income, net worth, and more.

2. Best for Automatic Tracking: Mint

Price: Free

Mint is an all-inclusive budget management tool that focuses on helping users track their spending automatically. The free budget app allows users to set spending targets for each category in their budget, and transactions are categorized in real time.

One of the biggest draws of Mint is that it’s a clean, centralized place for users to view their entire financial life in one spot. Users can link almost any financial account to Mint, including banks, credit cards, loans, and investment accounts. Mint is used by over 20 million customers and has remained one of the top tools since it hit the market in 2006.

3. Best for Keeping It Simple: PocketGuard

Price: Free or $7.99/mo for PocketGuard Plus (cheaper if paid annually)

PocketGuard is geared toward millennials who are new to budgeting and want something that’s easy to use. Similar to other apps on this list, PocketGuard allows users to sync all of their financial accounts to the app.

Where PocketGuard shines the most is its “In My Pocket” feature, which lets users quickly see what money is safe to spend after factoring in bills, ongoing spending, and savings goals. For instance, if a user finds a pair of shoes they want for $65 but they aren’t sure if they can afford them, a quick glance at their In My Pocket balance provides the answer.

PocketGuard also identifies opportunities for users to save money like canceling recurring subscriptions or negotiating bills. And through its referral program, you can accrue points to trade for a month (or more) of its PocketGuard Plus service.

Also, if you don’t like the idea of paying a monthly fee to use to use the app, PocketGuard Plus lifetime access is available for a one time purchase of $79.99.

Related: How to Make a Zero-Sum Budget: Your Tool to Financial Freedom

4. Best for Zero-Based Budgeting: YNAB

Price: 34-day free trial, then $99/yr (or $14.99 per month)

You Need a Budget, also known as YNAB, is one of the most popular and well-known budgeting apps. It works on the premise that every dollar has a purpose. Whether it’s paying a mortgage, buying a latte, or saving for the future, the idea behind YNAB — and zero-based budgeting in general — is that every dollar is accounted for at the end of the month. 

This easy-to-use app is great for beginner budgeters or those who want to track all of their spending because they’re trying to pay off debt or reach another financial goal. It provides a central location to manage all of your accounts and debt, and you can even share the information with a partner or spouse.

Since you have to manually enter all of your spending, it forces you to pay attention to where your money is going. 

As YNAB advises, “All the dollars in your checking account are no longer at your disposal because now you are spending from the budget, from the plan, from your categories.”

5. Best for Envelope System Budgeting: EveryDollar

Price: 14-day free trial, then $12.99 per month or $79.99 per year.

EveryDollar is the budgeting app created by Dave Ramsey, one of the most popular figures in the personal finance industry. While a bit pricier than some of its competitors, Ramsey+ (formerly EveryDollar Plus) comes with access to Financial Peace University, Dave Ramsey’s flagship personal finance course, and other features including spending insights and the ability to track your progress through the Baby Steps.

EveryDollar works off of the envelope budgeting system, which is similar to zero-based budgeting. For users looking to assemble a debt payoff plan, EveryDollar has built-in features like the Debt Snowball Tool to help. Similar to other apps on this list, Ramsey+ syncs with a user’s outside accounts and updates transactions in real time.

For anyone following Dave Ramsey’s program, this app is a perfect fit. However, if you can’t afford Ramsey+ or don’t need the other features, there is a free version that allows you to create a basic, customizable budget.  

6. Best for Couples: Honeydue

Price: Free

While many of the apps on this list allow for multiple users, the Honeydue app is specifically designed for couples. The app allows each partner to stay up to date on account balances, bill due dates, and it even allows users to split bills within the app.

The most unique feature of Honeydue, though, is the messaging feature. For instance, if a transaction looks suspicious or fraudulent, a quick message to your partner can clear things up. Users can also send encouraging notes and emojis, which can help facilitate difficult conversations and help couples merge their finances without any drama. 

The app does have privacy settings so users can decide how much information they want to share with their partner. For instance, if you have separate accounts, you can decide to share account balances but not every specific transaction. This is particularly helpful if you’re planning a surprise gift or trip, but if you’re concerned about financial infidelity, you might want to choose an app that provides more transparency for both parties’ spending.

7. Best for Tracking Net Worth and Spending: Empower

Price: Free

Empower’s (Previously Personal Capital) main claim to fame is its investment software, but the app also boasts a powerful set of budgeting planner tools for everyday users. The app allows user to connect all their financial accounts, including checking, savings, credit cards, loans, mortgages, and more.

In addition to the spending tracking, Empower has a net worth tracking feature that shows a user’s net worth trends over time. The app can also help you find any hidden fees, develop a personalized retirement planning strategy, and customize your investment portfolio.

Honorable Mentions: More Budgeting Apps to Consider

If you’re looking for some alternatives to the best budgeting apps, here are a few to consider. 

Goodbudget

Price: Free for the basic plan, $7/mo for Goodbudget Plus

Goodbudget is another app for you to use if you prefer to budget using the cash envelope system. Rather than putting your money in physical envelopes, you create digital ones within the app. You can choose the categories, spending limits, and there’s even the option to establish envelopes for saving and paying off debt. You can also sync and share your budget and spending with other family members.

Goodbudget comes with both a free and paid option. They offer the same features. However, the paid version comes with more options. For instance, with the free version, you can only set ten envelope categories. The paid account offers an unlimited number of envelopes. And you can link up to five accounts through Goodbudget Plus whereas you can only link two with the free plan. 

Goodbudget also offers a free month-long online course for those who are new to budgeting and has two seasons of a budget living podcast.

If you’re new to budgeting and plan to manage your money with someone else with the envelope system, Goodbudget is a solid choice.

Wally

Price: Free for the basic app, $19.99 for lifetime membership to the paid version

Wally helps users budget, track their spending, set savings goals, and provides regular updates and insights into your spending. There’s also a feature that allows users to scan important documents and receipts directly into the app. When you scan your receipts, the app will automatically track the expenses for you; there’s no need to manually input the purchase.

If you opt for the paid version, you can monitor and track foreign currency accounts and digital wallets along with your traditional bank accounts. Other premium features include the ability to schedule payment reminders, create an advanced budget with customized budget categories, and jointly manage finances with family, friends, or business partners.

Wally is best for users who want to track their expenses and spending but already have a basic understanding of budgeting.

A Few Things to Be Aware Of When Using a Budgeting App

If you are new to using apps to manage your money, there are a few things you should know.

• Set aside time for account setup. Although it can be tedious and time-consuming, anywhere from 10 minutes to an hour or more per app, it’s worth taking the time to sync all of your bank accounts within an app. The more accounts and information you can include, the more useful the app will be. If you plan on testing several apps, set aside time to set up each one correctly. 
• Transactions will get miscategorized. Almost all of these apps rely on algorithms or AI to categorize your transactions. This makes them prone to error, which is why it’s important to inspect each transaction to make sure it’s categorized correctly. As you fix the errors, the apps “learn” and make the correct designation next time.
• You may need to re-sync accounts at times. Between two-factor authentication, security questions, device settings, and other factors, your accounts may occasionally become disconnected from an app. While this can be frustrating, the extra layers of security are necessary to protect you from fraud. 
• Beware of notification fatigue. Some of these apps will notify you multiple times per day, and it can become a lot to manage. Rather than ignoring or deleting them, adjust your alert preferences. Set your notifications to once a day or for email alerts instead of ones directly from the app. Whatever you prefer, set your alerts so that you’ll actually pay attention to them. A budgeting tool is only helpful when it’s being used.
• Free apps make their money off of advertising. Even though you aren’t paying to use the app, the companies still need to make money. For example, Mint is totally free to users but earns money by referring customers to other financial products and services. It may earn a referral fee for each user who signs up for a suggested product. While the company is still providing you with a legitimate product and advice, this is something to be aware of. 

How to Decide Which App is Right for You

With so many choices out there, it can be tough to decide on just one app. The best way to know for sure if a tool is going to meet your needs is to try it. 

In general, it’s a smart idea to research the apps before using them. You also want to make sure you fall into the target market for an app. You can do that by browsing the app’s website or reviews.

For instance, after spending a few minutes on PocketGuard’s site, you’ll quickly learn the app caters to millennials. If you’re a professional looking to get a longer-term view of your finances and overall wealth, consider using Personal Capital instead. If you’re looking to manage your money with a partner, Honeydue may be the best fit. 

Remember that it’s OK to dislike an app after giving it a try. You might find it’s cumbersome, doesn’t do what you want, or is too expensive for your needs. There are a number of alternatives you can use. Keep trying paid and free budgeting apps until you find what works for you. 

More Resources to Help You Budget

If you are looking for more help with getting started with budgeting, check out these resources.

Emergency Fund Calculator

50/30/20 Budget Calculator

Zero-Based Budget Calculator

Savings Goal Calculator

The post 8 Best Budgeting Apps for 2024 appeared first on DollarSprout.

They’ll spend hours poring over budgeting spreadsheets, examining the finer details of their investment accounts, and organizing the cash in their wallet by denomination.

For someone like that, being offered basic budgeting advice is like preaching to the choir.

For the rest of us, there’s the 50/30/20 budgeting system.

Whether you’ve struggled to budget consistently in the past or you’re looking to find a less time-intensive method, the 50/30/20 might be the approach you need to finally make it all click.

What Is the 50/30/20 Budget?

The 50/30/20 system was designed to make budgeting more accessible to people who get overwhelmed by complicated spreadsheets and budgeting apps. It was popularized by Senator Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan.

The beauty of the 50/30/20 budget is in its simplicity. It’s designed for people who want to track their spending without dividing each expense into a dozen separate categories.

Users of the system divide their transactions into just three buckets: needs, wants, and debt payments/savings. Spending is broken up into 50% for needs, 30% for wants, and 20% for savings and debt. Groceries would be in the needs group, makeup would be a want, and student loan bills would be a debt payment.

Here’s an example of what kinds of transactions might fit into each category:

Related: How to Make a Budget

Is the 50/30/20 Budget Right for You?

If you’ve tried to budget before and never quite got the hang of it, a 50/30/20 budget might be right up your alley. It’s like starting a fitness program. Jumping straight into a powerlifting routine might leave you sore and unmotivated, but starting with some light yoga will allow you to build a consistent exercise habit.

With the 50/30/20 system, you can start with the basics and get more complex as your financial literacy improves. It’s less of a specific system and more of an overarching philosophy.

It’s vague but flexible.

The 50/30/20 budget has become popular with people who struggle to categorize their spending. If you have separate line items for household goods and groceries, for example, a simple trip to Costco for saran wrap and cooking oil forces you to separate individual items from your receipt. With the 50/30/20, that kind of fussing is unnecessary.

The upside to this broader approach is that you spend less time figuring out how to budget each shopping trip. The downside is that you don’t really see where your money is going. If you need to cut some expenses from your “wants” category, the 50/30/20 budget won’t show exactly where you’re overspending.

It puts savings and debt on the back burner.

One of the reasons the 50/30/20 budget is popular is because it allows for 30% of a consumer’s income to go toward discretionary spending. Unfortunately, that doesn’t leave as much room for savings and paying off debt.

If your student loan payments make up 20% of your budget and you aren’t saving anything for retirement, the 50/30/20 approach could give you a false sense of stability. In reality, you’ll just be forced to play catch-up in the future.

Anyone who uses the 50/30/20 budget while paying off a significant loan balance should still try to save between 10 and 15% of their salary for retirement, even if that means shifting the spending ratio to allow for more saving.

It may not be a long-term solution.

The 50/30/20 is often suggested for beginners because it’s easy to use and set up. It also leaves a lot of room for variation, as long as you’re staying within the correct spending ratio.

But as a long-term budgeting strategy, the 50/30/20 budget might not hold up as well as a traditional line-item budget. That’s because the 50/30/20 split makes less sense above a certain income bracket.

When you’re making an entry-level salary, the 50/30/20 ratio is perfect. It allows you to enjoy your life and live comfortably while still prioritizing debt repayment and saving for retirement. But as your career progresses and your income increases, spending 30% of your income on discretionary items can be frivolous, and it can hold you back from reaching significant financial milestones.

Under the 50/30/20, someone making $80,000 a year after tax would have $2,000 a month for discretionary spending. That may be reasonable for someone with a robust social life and multiple hobbies, but many people would have to go out of their way to spend that much. As you approach upper-middle class, it makes more sense to follow a personalized budgeting system and devote more of your income to building a nest egg.

Related: How to Use the Cash Envelope System to Stop Overspending

How to Use the 50/30/20 Budget

There are three simple steps to creating and implementing a 50/30/20 budget spreadsheet.

Step 1: Figure out your take-home pay.

The first step in creating a 50/30/20 budget is to figure out your net income since that’s the figure you’ll be dividing from. Your net income is how much you take home after payroll taxes are deducted.

Look at your most recent pay stub to see what your take-home pay is. Even though your health insurance and retirement contributions may be deducted from your paycheck, you want to count these expenses as part of your budget.

If you’re self-employed, you’ll want to figure out your take-home pay after federal and state self-employment taxes. These will vary depending on your income and business expenses, so just use your best estimate.

People with irregular salaries, like salesmen working on commission or those with seasonal income, should use a realistically low figure when calculating take-home pay.

Step 2: Calculate your percentages.

First, make a list of all your transactions from the past month:

Then divide them into needs, wants, and savings/debt categories. Divide each of the three categories by your take-home pay to calculate your percentage, then compare those percentages to the ideal amounts. For this example, let’s assume a take-home amount of $2,700 per month.

Step 3: Adjust your spending and saving.

Like most people who create a 50/30/20 budget, you’ll probably discover that your percentages are out of alignment like the example above. Maybe you’re spending too much on your needs and not enough on your savings, or your wants category might be out of control. Don’t beat yourself up – it’s normal to find out your spending is a little off.

Examine where you need to make a change and explore options for how to save money in those categories. In this example, you can clearly see that the needs category greatly exceeds the 50% goal. To cut back, this person could reexamine their utility usage, negotiate with their cell and internet providers, or find a less expensive apartment.

You can also see in this example that student loan and car payments are mostly responsible for exceeding the 20% debt payment/savings category. In that case, it could be wise to make faster debt payoff a goal or try to pick up a side hustle.

The 50/30/20 Budget Simplifies Managing Your Money

Overall, consumers who like and stick with the 50/30/20 budget do so because of how simple it is. There’s little doubt on how to categorize expenses, and evaluating your spending can take just a few minutes each week.

The 50/30/20 budget has stuck around because it helps people who want to be responsible with their money but don’t like the restrictive nature of most budgeting systems.

The post The 50/30/20 Budget Rule Explained (with Examples) appeared first on DollarSprout.

In fact, I’d argue it takes most people 3-6 months to learn how to track expenses, stick to a budget, and plan achievable goals for the future.

In other words, no one is born knowing how to track expenses and budget. It’s something that you have to learn, and it takes trial and error.

I’ve tried just about every method out there from budgeting apps, to a pen and paper, to cash envelopes. While there are many different ways to manage your money, one thing is true about all of these methods: you have to track your expenses or your budget will never work.

Why Should You Track Your Expenses?

Keeping track of expenses is important for so many reasons. First of all, it’s impossible to budget your money if you don’t know where it’s going each month.

Tracking your expenses also gives you insight into some of your behaviors around money. For example, you might notice you spend more money on the weekends or tend to order takeout on Thursdays when you don’t feel like cooking anymore.

Tracking your expenses gives you good information. It shows you where you excel when it comes to money and places you can improve. It also lets you know your priorities. All you need to do is see where you spend the most money to find out what is most important to you.

3 Steps to Track Expenses

If you’re ready to become a champion spending tracker, there are three steps you need to take. First, create a budget. Then, decide how you will track your spending (with an app, spreadsheet, etc.) Lastly, schedule weekly check-ins to keep yourself on track.

1. Create a budget

People usually cringe when they hear the word budget because it sounds like a fun suck. After all, don’t people who budget live boring lives? Not so!

The first step to creating your first budget is to set goals for your spending. For example, is it your goal to spend fewer than $50 a month on takeout? Write it down.

Then, after your first few months of using a spending tracker, you can measure your goal with your reality. If you come up short, that’s ok. That’s why it’s so important to track your spending. We usually spend more than we think on certain categories. Tracking that can help cure some bad financial habits.

2. Decide on a spending tracker

Once you have a basic budget in place and a list of your spending goals to go along with it, it’s time to start tracking. There are many different spending trackers out there. Here are a few of the most common ways to track what you spend.

Popular apps for personal expense tracking

In the modern, digital age, budgeting apps are taking the market by storm. It seems every time you turn around, there is another one out there. Below are some of the best budgeting apps we’ve tried and like.

Personal Capital

First and foremost, Personal Capital is an investment advisory firm. This means Personal Capital employs financial advisors to help its clients with their investment choices. In order to work with the company as an advisory client, you have to invest a minimum of $100,000 with it.

However, even if you don’t have $100,000, Personal Capital offers free budget-tracking software. Connect all of your accounts to its free platform, and you can see your net worth, track your spending, and more. You’ll get emails every week telling you how your portfolio is doing.

Keep in mind that the overall goal of Personal Capital is to eventually acquire clients, and offering free tracking software is one way to spread awareness of its services. However, before you sign on the dotted line as a client, take the time to compare its fees with other brokerage firms to make sure you find one that’s the best fit for you.

Tiller

Tiller is similar to an expense tracker worksheet that you would create yourself, except it’s so much more sophisticated than that.

Tiller pulls information from your bank accounts and then automatically populates a spreadsheet for you. You still get the same great spreadsheet magic that you love except Tiller does all the heavy lifting and data entry for you. You can try Tiller free for 30 days, and then it is $79/year to keep.

YNAB

YNAB stands for You Need a Budget. YNAB offers comprehensive online budgeting software that is based on the principle that everyone should budget one month ahead. YNAB does come with a monthly fee, but you can try it for free for 34 days.

Full disclosure: After trying many different budgeting apps, YNAB is the one that works best for me personally because I also adhere to the philosophy of starting the month with the full amount of money I need for that month.

However, it really took some time to learn how to use the software. I actually tried it once before, got frustrated, and stopped using it. Then I got an email from YNAB inviting me to try it again.

The second time I tried it, I spent more time watching the videos and understanding how it worked. That did the trick. I’ve been using it faithfully for over a year.

Also, even though YNAB isn’t free, it is ad-free. So you won’t be faced with ads for insurance or phone companies or other financial products while you’re using it. This allows you to focus on your own budget without distractions.

Mint

Mint is one of the most popular budgeting software systems out there. It was one of the very first companies to help consumers digitally track their budgets, and it’s free to sign up.

Connect your accounts, categorize your spending, and then find ways to customize Mint to work for you. You can even set up reminders to notify you on your phone to pay your bills.

You can also add alerts to let you know when you’ve gone over budget. If you happen to find out you’re over your grocery budget, you know it’s time to open up the pantry and start using those cans of tuna you’ve been avoiding.

Of course, part of what makes Mint free is that it earns money from different recommendations like credit cards, life insurance, and other financial products. If you don’t mind the ads, this is a great, free product that many people have enjoyed using for years.

Wally

Wally is a relatively new budgeting app that’s recently hit the financial tech scene. Based on reviews of the app, Wally is still in its beta phase but with room to grow.

The way Wally works is by keeping you hyper-aware of your spending. Rather than automatically importing your credit and debit transactions, you manually enter what you spent.

Wally can, however, use GPS to see where you are when you spend money. So if you are waiting for your coffee in line at Starbucks, Wally should be able to know you’re there and suggest that vendor as the one to enter.

This system of entering your spending after you just had the transaction keeps you aware of your day-to-day spending habits. This would be excellent for someone just starting out budgeting who really needs to understand their behaviors around money in real-time.

Pen and Paper

You can’t go wrong with a good, old-fashioned pen and paper. This is an inexpensive way to track your spending. I used to do this when I lived abroad and didn’t have a smartphone.

I had a little pad of paper I’d keep in my purse. When I bought something to drink or eat, I just jotted it down. After a few weeks of doing this, you can notice spending patterns. It’s also a very active way to track spending that really makes you think before you buy something. After all, if you buy it, you have to write it down so you remember!

Expense tracker spreadsheet

Many people love using their own expense tracker worksheets, which you can create in Excel or Google Sheets.

The reason this works is because you can really customize an expense tracker spreadsheet to your own budget and spending categories. It’s free, and now you can share a Google Doc spreadsheet with your spouse and track your spending together.

3. Set weekly check-ins

Once you’ve found an expense tracking system that works for you, it’s important to set weekly check-ins. This can be something you put on your own schedule and stick to if you’re single or it can be something you do with your partner.

The reason weekly check-ins are so important when it comes to expense tracking is that it allows you to adjust your spending for the following week. That way, if you bought too much wine because it was on sale at the grocery store, you know that you might be having a pantry challenge the following week to make up for it.

 

 

 

 

 

 

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Managing your money doesn’t have to be a challenge!⁣ ⁣ Money is a tool that, when used effectively, creates options for you. Managing your money wisely will give you the freedom to live well, and being in control of your finances and your monthly budget will also give you peace of mind. ⁣ ⁣ This quick tidy up should get you well on your way to better managed finances! Oh, and don’t forget to do your check ins!

A post shared by DollarSprout Personal Finance (@dollarsprout) on Sep 26, 2019 at 9:40am PDT

Getting Started is Key

If you’ve struggled with budgeting in the past, tracking your expenses every day is likely the missing ingredient to budgeting success.

Remember, creating a budget and sticking to it doesn’t mean your life will be full of restrictions. Instead, you can feel more in control over your money, learn how to allocate funds to your priorities and cut back on the things that don’t really matter to you.

Be patient with the process, and switch up your expense trackers if the first one you tried doesn’t work for you. Try this for a few months, without fail, and tracking expenses will become a part of your daily life. Soon, you won’t know how you lived without knowing exactly where your money goes each and every day.

The post How to Track Expenses in 3 Simple Steps appeared first on DollarSprout.

Taking a vacation is a great way to reduce stress and improve productivity, but traveling can be costly. Making a travel budget will make a big difference while planning your next getaway.

Those who love to travel should incorporate it as a line item in their monthly budgets. Each month, set aside a certain amount for travel in its own separate account.

Earmark that money specifically as a vacation budget so that it can be spent guilt-free. Money that is put toward trip expenses can simply be reimbursed from the travel account.

With that said, if there is outstanding debt that is difficult to pay off, planning an immediate vacation may not be a good idea. In this case, the priority should be to set up an emergency fund that includes three-to-six months’ worth of living expenses.

Why Is Budgeting for a Vacation Important?

While it is good to get into the habit of setting aside vacation funds every month, it is also important to create a budget for each individual trip. This will help determine how long it will take to build up enough money in the vacation account to pay for that trip. It will also allow for logistics to be planned out, while staying on budget.

Scheduling and budgeting for vacations can be very enjoyable. Researching hotel accommodations, restaurants, and free things to do helps to build up anticipation. It can be fun for the whole family to spend time together, figuring out the different parts of an upcoming trip.

How to Budget for A Vacation in 5 Simple Steps

When it comes time to map out those vacation expenses, a few key steps will help lead to success and worry-free traveling. Begin by drafting a well-rounded vacation budget, focusing on expenses in the following five main categories. Once these are figured out, the rest of the details will fall into place.

1. Choose a destination and preferred date

Start by picking a destination and nailing down travel dates. Remember that some locations are more expensive to visit than others. The time of year can also make a difference in pricing. Traveling done at peak tourist times usually costs more than off-season trips.

Be flexible

Being flexible is one of the easiest ways to save when budgeting for a vacation. Check out multiple travel destinations and compare prices before settling on options for lodging and airfare. Since these are two of the largest expenses in any travel budget, keeping them in check will go a long way toward helping to keep the overall cost down.

Be willing to look at alternative accommodations or stay at a place that is a little farther away from the tourist areas. Remember that most vacation time is spent outside the hotel room – so there is no reason to put a large chunk of the budget toward nice accommodations that will be used only for sleep.

Also, be flexible when choosing a travel date. Many travel search engines have a “flexible dates” option that can be used to research the lowest prices for airfare and lodging. Plan around these dates for added savings in the travel budget.

Consider the season

The time of year can really impact a travel budget. A lot of people have begun to plan weddings around their honeymoons, and not vise versa. For example, if the goal is to travel to Italy without spending a fortune or facing large crowds of tourists – while still enjoying nice weather – get married in early autumn, which is known as the shoulder season. It’s a great time of year to travel, because the weather is still nice, but the crowds have thinned out. Most people with children travel during the summer. Once the kids are back in school, prices for airfare and accommodations tend to drop, allowing people with more flexibility to travel cheaper.

Related: Make Money Renting Your Home with Airbnb While You’re on Vacation

2. Make a list of your major expenses (use a travel budget worksheet)

When drafting a travel budget worksheet, plan for the biggest expenses, including transportation, accommodations, and food, first. Getting those out of the way will greatly aid in putting together the overall vacation budget.

Research cheap travel deals (transportation)

Transportation costs for trips that are taken close to home will not be very high. But when airfare comes into the picture, the transportation line item will increase dramatically. Research multiple airlines for cheap travel deals, and consider taking connecting flights to cut down on the cost. If it’s feasible, check out the price of flights leaving from airports in nearby cities.

Flights on airlines to and from major airport hubs are usually lower in cost. For example, American Airlines and Southwest Airlines are both headquartered in Dallas. Flights on those airlines tend to be the cheapest travel to and from that area.

Research accommodations

Another large expense in any travel budget is lodging. There is a wide range of options to consider when it comes to picking out a place to stay, including hostels, hotels, motels, bed and breakfasts, or apartments. Or, if a trip includes camping, those accommodations can include cabins and tents.

Rather than being brand-loyal to a particular hotel, utilize travel sites like Hotels.com to compare costs at different chains. After all, most travel time is spent sightseeing and exploring, not inside the room.

The closer accommodations are to major attractions, the more expensive they will be. Consider staying somewhere off the beaten path to save money.

When traveling with a group of people, split the cost of accommodations. For example, rent a house or condo with multiple rooms and divide the costs. If your destination is more remote, consider renting an RV. For as low as $175 per night, you can comfortably sleep 10 adults and still come in under $20 per person per day.

Budget for food

One of the trickiest line items in a vacation budget is food. To save some money in this area, choose a place to stay that has a kitchen – or at least a refrigerator and microwave. Eat some meals there, and then splurge a few times by going out to eat at local restaurants.

Another great way to save money on food is to stay in a bed and breakfast or a hotel that includes breakfast. Some chains like Homewood Suites or DoubleTree offer both a kitchen area and a hot breakfast, which helps in saving money. Drinks bought while eating out can quickly add to a bill, so buy wine or beer for the room to keep that travel budget in check.

When budgeting for meals, try going out for lunch instead of dinner. Lunch is usually cheaper than dinner, and many of the same options are offered for less. It is also usually not as tempting to order pricey alcoholic beverages during lunch.

Related: How to Find Cheap Gas Nearby (When You’re On the Go)

3. Make a list of smaller expenses

Once the larger expenses are planned out, figure out the extras, like sightseeing, entertainment, and gifts.

Research potential vacation activities and local places to visit. Go online to get an idea of the associated costs, and budget accordingly.

Don’t forget to plan for any necessary vaccines if traveling abroad, as well as gifts to take back home. Build a buffer into the budget to account for any surprise expenses. It’s always best to plan for more, and then spend less.

4. Determine the monthly savings

Once a rough vacation budget has been established, it’s time to figure out how to pay for it. Take the total amount and divide it by the number of months left until the trip. For example, if the vacation date is in nine months and the cost of the trip is approximately $2,700, $300 must be set aside every month.

If that amount seems too large, there are two options: adjust the timeline or make some extra money.

If necessary, push the trip out by a few months until enough money can be saved, or figure out how to bring in some extra income. There are many different ways to make money on the side, and help to reach that savings goal.

5. Vacation budgeting doesn’t end there

Those travel budgets won’t do much good if they aren’t followed. It is important to track costs and stay on top of spending while on vacation. Don’t stress out over every penny, but don’t go overboard, either. It wouldn’t be fun to see some nasty surprises on the bank or credit card statement later.

One of the easiest ways to track expenditures while traveling is with a budgeting tool like Personal Capital. Alternatively, keep on top of spending with an Excel spreadsheet or even with a pen and paper. Whatever the method, keep it updated and check it regularly.

Bonus Tip: Draft an itinerary

While it’s not necessary to create an itinerary when budgeting for a vacation, it really helps stay on track. The best way to do this is by using an Excel spreadsheet. Make a rough outline with a separate entry for each day of the vacation. Fill in all of the travel information and any scheduled activities like sightseeing tours.

Make a separate column to the side and list out all potential vacation activities. Group together any events that are in the same area of town and write down approximately how long each one would take. Now slot them in under the different day headers for either the morning or afternoon.

Try to group together activities or sightseeing that will occur in the same part of town. Food and restaurant options can be added in after the schedule is roughed out.

Itineraries are meant to be flexible, not restrictive. Move things around to find the right balance. Note the associated cost of each entry on the list.

Add all of the expenses together at the bottom of the spreadsheet to estimate the total travel budget. Remember that it’s not necessary to follow the itinerary word for word. Use it as a planning tool and focus on enjoying the trip.

Creating a Travel Budget Is Well Worth the Time

Even though it may seem like creating a travel budget can be a hassle, in the long run, it will make vacations far more enjoyable.

Having a vacation budget means not stressing about money after the trip. It allows for advanced planning and time to save up enough money. Budgeting for a vacation means that it will be easy to relax and have a good time, knowing that everything is in the budget and ready to be paid for.

The post How to Make a Travel Budget in 5 Easy Steps (Free Planner) appeared first on DollarSprout.

You’ve got money goals. Whether you want to get out of debt, save for retirement, or afford that luxury vacation in Cabo, there is one thing you know you have to do:

Get control of your spending.

Creating a budget doesn’t have to be scary or overly restrictive. In fact, a good budget is flexible! It knows that your life is ever changing and helps you prepare for that reality. The only requirement of a good budget is that it helps you get conscious of your spending — and live within your means.

Here’s how to make a budget that works for you, so you can stress a little bit less about money.

Step 1: Find the Right Method for You

There are many budgeting methods, each of which has its merits. We’ve summarized three of the most popular methods below that will teach you exactly how to make a budget plan. Consider your personality and choose the one that sounds most attractive to you. Don’t worry if it takes a little trial and error!

Option 1: 50/30/20 Budgeting Method

Best for: People who want a budget, but also want to keep things simple.

The easiest budget rule, the 50/30/20 method is indifferent to your exact spending on electricity vs. your cell phone bill this month. All that matters is that your spending stays within three main categories: Needs: 50%, Wants: 30%, Savings: 20%.

The benefit of the 50/30/20 rule is that no one category is expected to be static. The composition of spending can be different every month. But as long as your spending fits into the limits set by the broad categories, you’ll continue moving toward your goals.

It is simple, yet powerful. You are always saving for the future, but you don’t get bogged down with the details.

Option 2: Zero-Based Budget

Best for: People who want full control over the purpose of every dollar in their budget. A zero-based budget operates under the idea that any dollar not tracked will be spent — and probably on something silly.

With a zero-based budget, you assign every dollar a job. If you have $4,000 of income and only $3,500 of expenses in your budget, you aren’t done. You must give the remaining $500 a task. Are you saving $200 for retirement? Putting aside $50 for your daughter’s college? Create budget categories and assign values until your income minus your assigned outputs equals zero.

This method takes time. It requires that you look at every single expense in your budget. But practiced well, users find they have fewer unexpected expenses and more confidence that their spending expresses their values.

Option 3: Envelope System

Best for: Habitual over-spenders who need more discipline built into their budget.

Meant for those who really struggle with overspending, the cash envelope method is rigid.

Originally a cash-based method, you would withdraw all the money you planned to spend that month in cash, then split it into individual envelopes for all your expenses — cell phone, groceries, gas, clothes, and so on. If you run out of money in an envelope before the month is up, you’re out of luck. You either need to move money from another envelope, or just wait until the following month.

Luckily, there are now apps to help you follow the envelope method while still using debit and credit cards. However, there are some big-name proponents (like Dave Ramsey) of continuing to use cash over an app. They believe it fosters greater awareness and good habits.

Step 2: Decide How You’ll Track Things

Creating a budget once won’t change your financial life. To have an impact, you need to continue budgeting consistently. That means you need a way to track your budget.

Here are some popular options:

Option 1: Use a budget worksheet

The pen and paper method isn’t fancy, but it gets the job done.

Especially for beginners, tracking expenses has the benefit of making you carefully consider where you stand in a way that more automated budget systems don’t.

Option 2: Use a budget app

If you prefer to operate in the 21st century, there are numerous apps to help you track your new budget.

Personal Capital is a good budgeting app for those following the 50/30/30 rule (and it’s free!). It allows you to set a spending target and alerts you to progress throughout the month. It also automatically breaks expenses down into categories for you, so you can easily see where your money is going.

Other popular free options include Mint and PocketGuard. Alternatively, I’ve been using You Need A Budget since college, but it does have a monthly fee – unlike the other options listed here.

Option 3: Write it all down in a bullet journal

Can’t find a worksheet or app that works for you? Or do you just love being creative? Bullet journals allow you to bring organization and beauty to your budget tracking.

Get a quality notebook, check out some bullet journal layouts for inspiration, and design your unique budget journal.

Now, choose your tracking method and get to work.

Step 3: Figure Out Your After-Tax Income

You can’t determine your budget until you know how much you have to spend.

To figure out how much you have available to spend each month, you need to determine your after-tax income. This is the amount that comes in on your paychecks and that you have available to spend.

Add up all your sources of income in a given month. Your job, your spouse’s job, any side hustles, and passive income. This is your base.

Note: If you get paid every two weeks, you know there are some months you get a lucky third check. Don’t try to add that payment in and create an average month. Build your budget around a two-check month, then use the little bonus to fuel your savings goals.

Bonus: Want more spending money? Check out these 50 online side hustle ideas.

Step 4: See Where You Are Currently Spending

Hold on tight. It’s about to get real.

Before you can finish your budget, you have to reflect on where your money is really going. And if you’re starting a budget because you know you’ve been overspending, this can be tough. Just remember not to beat yourself up for past spending. You’re making positive steps to be more financially responsible. That’s all that matters!

Review your last 2-4 months of expenses and break them down into spending categories. Look at bank and credit card statements to help you get a sense of where you’re at. In places where you use cash, try to make a best guess at your spending. Also, make note of any minimum payments on debt, as that also has a white-knuckled claim on your money.

Have your list of categories, along with what you are spending on average, on hand.

If you are using the 50/30/20 method, here is what you would do next:

Allocate 50% of your income to needs

Your most significant and crucial budget category is needs. But what are needs?

Needs are comprised of living expenses and essentials; items like your rent or mortgage, utilities, and home and auto insurance. These are expenses that you can’t forgo without a major inconvenience. (Your cable package and yoga classes don’t count.)

You’ll also want to include any minimum payments on debt. These are required expenses and should be treated as “needs” instead of debt repayment.

Make a list of all the items in your needs list with their associated expenses. If the total is more than 50% of your income calculated in Step 3, find places to cut. If you can’t get to 50%, the overage will have to dip into your 30% “wants” budget for a while.

Allocate 20% of your income to debt repayment and savings

After needs, the 50/30/20 budgeting method prioritizes savings. You need to save for your future, every single month.

Calculate 20% of your monthly after-tax income from Step 3. If you aren’t a math whiz, just open up your phone and multiply your income by 0.2. This is the amount you need to contribute to saving money in your emergency fund or retirement accounts.

However, if you still have debt, you can also include extra principal payments in this 20%. Getting out of debt is an investment in your future, and the 50/30/20 rule knows that.

Related: How to Save $5,000 with the 52-Week Money Challenge 

Allocate 30% of your income to wants

What is left over after your spending on “Needs” and “Saving” is the maximum you can spend on wants. This is your quality of life spending, like choosing between an unlimited or a budget cell phone data plan, going all out or having a cheap date night, or choosing between a 5-star restaurant and ordering Chinese take-out.

You’ll want to reflect on the spending categories you compiled earlier from your last few months of spending. What items were left after removing the needs? Does the sum fit in the remaining 30% of your budget? And if not, where can you cut?

Remember that you also need to set aside cash for longer-term wants, like your annual family vacation.

More than any other, this step can be tricky. You’ll have to make choices. Unfortunately, we can’t do everything we want. But if we understand our own priorities, we can do anything we choose. Reflect on which of your “wants” is most important to you, then skip the things that don’t bring you as much joy.

Note: For “Needs” and “Wants,” 50% and 30% are the max you can spend. Spending less, in support of greater savings or debt repayment, will help you reach your financial goals faster.

Step 5: Set Your Priorities

What do you want to achieve with your money?

While your ultimate goal might be saving for a long vacation or new house, you first need to build a solid financial base. By getting the necessary foundation right, your security won’t be thrown off by one unexpected expense. Setting your priorities is key to ending financial stress.

These are a few key money priorities you want your budget to tackle:

Build an emergency fund

If you’re still living paycheck-to-paycheck, your first goal is setting up a $1,000 emergency fund. We all know life loves sneaking up on us.

We recommend saving your emergency fund in a high-interest online savings account that provides safety plus guaranteed returns. This will ensure that you don’t spend that money, while allowing it to continue to work for you while it waits on the sidelines.

Once you’ve tackled your $1,000 starter emergency fund, you’ll want to continue to add to it. Depending on your job, a 3-6 month emergency fund is ideal. This will protect you from more considerable financial surprises, like a job layoff or health issue.

Pay off high-interest debt

Debt is an anchor on your money goals, particularly high-interest debt like credit cards. Every dollar you pay in interest is a dollar you can’t spend on your real month goals.

If you are still forking over part of your budget to lenders every month, you’ll want to start paying down debt. Organize what debts you have, decide which you want to pay off first, and start attacking your balance.

Get a full employer match on your 401(k)

Who doesn’t like free money? If you aren’t getting the full match on your 401(k), you’re missing out on the easiest free money you’ll ever get.

An employer 401(k) match is your company paying you to save. It’s an instant return on your retirement savings, and you should never leave that money on the table.

If you aren’t sure what your company’s 401(k) program offers, reach out to HR. Then adjust your contributions to maximize your match (a.k.a. free money).

Set up automated savings for retirement

Covered the basics? Good! Now you need to start getting serious about preparing for retirement. If you don’t already have one, you’re going to want to open an IRA (Individual Retirement Account).

These accounts offer excellent tax benefits to incentivize you to save money for the future.

Determine how much of your monthly 20% savings allocation will go towards retirement. Then, set up an automatic deposit into your account each month through your IRA provider (most places nowadays have this functionality). With automated investing, you’ll be building a nest egg without even thinking about it.

Step 6: Track Your Progress

It’s official: you’re all set up! But you’re far from done.

Budgeting is a long-term game. You need to check in on your spending regularly to ensure that your needs and wants aren’t creeping beyond their 50% and 30% income designations. Plus, you’ll need to add new budget categories and delete others over time.

We recommend reviewing your budget on a weekly basis at the beginning.

Checking in every week will allow you to make course corrections before things get too far off track. Make note, if you’re budgeting with a spouse, you both need to be involved in the review. Having one person in a relationship dictating the budget isn’t a recipe for long-term success.

Eventually, you’ll get a feel for your spending habits and will be able to extend the time between meetings. However, always try to review your budget at least once a month. Even the most practiced and thoughtful spenders see money slip through the cracks when they lose focus!

Step 7: Re-Evaluate and Make Adjustments

One of the biggest mistakes new budgeters make is not sticking with the budget long enough. They get frustrated when they overspend in a category or an emergency expense sets them back on their goals. Not understanding that there is no such thing as a normal month or a static budget, they conclude that they are “just bad at budgeting”… and then they give up.

These are the moments to power through!

The first budget you make won’t be your last. You are new to tracking your expenses, so you are going to get things wrong. The important thing is to continue monitoring, review where your weak points are, and adjust your habits and budget accordingly.

Learning how to make a budget makes you more conscious of your money.

Continually striving to reach your goals drastically increases your chances of getting there, even if you stumble sometimes. Re-evaluate whenever necessary, but don’t give up. You can do this!

The post How to Make a Budget in 7 Easy Steps appeared first on DollarSprout.