Female bicycle commuter

We all know we should make and stick to a household budget if we want to be able to sock away savings each month—and end up financially comfortable. But building a household budget as a beginner can be daunting.

Only one in three Americans takes the time to create a monthly budget, a recent Gallup poll showed. (I don’t need to tell you the rest of us are spending an inordinate amount of time looking at cat memes instead…)

I admit, I was in this group for a long time—and then I moved on to the category of those who create budgets but don’t manage to follow them (What? I spent $200 on organic turmeric drinks last month?!)

But, happily, in the last year, I’ve at last gotten the hang of it—thanks to some pretty simple tactics:

Tracking Spending First

Before making a good budget, I obviously needed to know how much I was spending and on what. To make this easier, I looked for the absolute simplest app, and found it in the Australian government’s free TrackMySPEND, which works on Apple gadgets. On average, Aussies save more than double what Americans do, so I figured their national savings bureau’s apps should be solid.

The app lets you log all your spending, easily categorize it, and, this is key—label each expense as “need” or “want”—making it easy at the end of the month to detect where to cut back.  You can also set yourself spending limits. Get your kids on board and have them input all your daily shopping: “Mom, you spent $15 on shampoo?” is enough to make me return the product.

After you’ve been tracking your spending for a month, you should be able to move on to the next step:

Making a Realistic Budget—Including Annual Expenses and Surprises

I used the Australian site’s budget planner—which you can save in an Excel format or online.   One important thing it let me do was allot some money monthly for yearly expenses—things like eye exams, Christmas gifts, and car maintenance—so I wouldn’t get hit with a sudden big bill.

I also learned I should budget some cash for a “surprises fund,” since not planning for surprise expenses was a barrier to saving for 71 percent of Americans, a recent Pew Charitable Trusts survey showed.

Almost 2 in 3 U.S. households in the study had experienced a financial “shock” in the past year. On average, $2,000 of extra expenses popped up, for things like car breakdowns or sudden illnesses. Since one in three American families have no savings at all, that spells crisis.

So it makes sense to put away some money monthly to cover these surprises. If you make it through the year whammy free, you’ll have that extra cash to add to your regular savings—or roll it over for next year.

I also needed to make sure my budget wasn’t too harsh: I knew if I cut out all eating out I would feel miserable cooking on evenings when soccer practice, dance class, and a last-minute dinosaur diorama project all coincided.

So, now that I had my budget laid out, how to make myself stay on track?

Sticking With Cash

A huge help is paying for nearly everything using cash instead of cards. One MIT study showed people were willing to pay twice as much for NBA tickets if they were paying with a credit card! I’ve definitely fallen into this trap shopping for school clothes: if we take a debit card, I barely limit expenses, but if I know we only brought $200 cash to the store, my daughter has to stay within our budget.

One tactic is to put the exact amount of cash you budgeted weekly into envelopes (one for groceries, one for entertainment, etc.). That way you’ll never over-spend.

Related >> The power of a zero-sum budget

Taking Out Savings First—And Keeping Motivated With Positive Goals

Part of my newly budgeted life was also setting up an automatic transfer into a savings account at the start of each month.  I motivate myself to not withdraw it by putting up photos of houses and pictures of relatives in other countries—since homeownership and travel are two of my main savings goals.

Some experts say you should scare yourself into saving. There’s even an app where you can see an elderly version of yourself, which an NYU professor’s research claims can make you save more for retirement.  But personally, I do better  when I motivate myself with my dreams…and a little teasing from my daughter.

What’s your best budgeting advice?

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