How to Make a Budget You'll Actually Stick To

What is a budget?

A budget is a plan for your money, made before the month starts: how much you'll spend, on what, and how much you'll save. There's no single right way to do it. The best budget is the one you'll actually keep using, and for some people that's a detailed spreadsheet, while for others it's one number.

Most people roll their eyes at the word "budget." I get it. I've never kept a strict budget myself: I've always lived below my means, so I never needed to track every category. What I did instead is one of the three styles below, and it worked for me because it was simple.

I think of money as just a way to trade for the things you need and want. A budget is deciding ahead of time which of those your money goes to.

Step 1: know your numbers

Every budget starts with two numbers:

• What comes in: your take-home pay, after taxes and deductions, not your salary. The paycheck post explains the difference, and the paycheck calculator estimates yours.
• What goes out: what you actually spent last month. Your bank's spending summary, a budgeting app, or a plain spreadsheet all work.

The difference between the two is your cash flow, and it's the number every budget is trying to steer.

In my 20s, I used Mint just to track my cash flow each month: what came in and what went out. Mint has since shut down. Monarch Money is what I'd call its spiritual successor, and Rocket Money is another option. You don't need an app, though: a month or two of honest numbers, from anywhere, is enough to start.

Three ways to budget

Here are three common styles, from the most detail to the least. Say your take-home pay is a round $4,000 a month:

Style	With $4,000 a month	Good for
Every dollar a job	Rent $1,400, groceries $500, and so on, down to $600 savings: every dollar planned	People who like detail
50/30/20	$2,000 needs, $1,200 wants, $800 savings	A guide without tracking every purchase
Pay yourself first	$600 to savings on payday, $3,400 to spend	People who find categories too much work

Every dollar a job (often called zero-based budgeting) is the most detailed: you give each dollar a category (rent, groceries, gas, fun, savings) until your income minus your plans equals $0. Some people do it with real envelopes of cash, one per category, and stop spending when an envelope is empty. I use a digital version for bigger, irregular costs: named savings "vaults" (Vehicle, House, Gift) that fill automatically every month, which I described in the emergency fund post.

50/30/20 is a rough split: about 50% of take-home pay to needs, 30% to wants, and 20% to savings and extra debt payments. It's a rule of thumb, not a law. If your rent alone is half your take-home pay, the split won't fit, and that's fine: adjust the percentages and keep the idea.

Pay yourself first flips the order. Instead of saving whatever's left at the end of the month (often nothing), you save first and live on the rest.

My view: budgeting style is personal. Strict categories work well for some people and are too much friction for others. Pick the one you'll actually do.

Paying yourself first: one number to watch

Pay yourself first is the closest to what I do. My 401(k) comes out of each paycheck in payroll, and a set amount moves into each of my named savings accounts automatically every month. My best practical tip: in your employer's payroll system, send a percentage of each paycheck straight to savings or investments, before it reaches your checking account. You don't have to remember, and you don't have to decide each month whether to save.

Then there's only one number to watch: your savings rate, the share of your take-home pay you save.

Savings rate = what you save ÷ your take-home pay. In the example above, $600 saved out of $4,000 is a 15% savings rate.

I figured mine from take-home pay and didn't count my 401(k). That's what mattered to me, and I think for most people it's all that matters: working out pre-tax math is extra effort that misses the point, which is saving as much as is reasonable while still enjoying your life.

In my 20s, savings rate was the number I watched, because it's one simple number to push up, so I made it a game. At one point I got it to 40%, which I wrote about in the 401(k) post. It took both levers. A job change came with a big raise, and I deliberately didn't grow my lifestyle to match. I did move to a more expensive area for the new job, but I didn't spend the rest of the raise. Either way, the number tells you whether it's working.

Paying yourself first doesn't only mean savings. It can also mean extra payments on high-interest debt, like a credit card balance, which compounds against you the longer it sits.

How to make a budget stick

• Automate the important part. Savings and bills that move on their own don't depend on willpower.
• Plan for the irregular stuff. Car repairs, gifts, and yearly subscriptions break budgets because they don't show up every month. Set a little aside for them each month, like the sinking funds in the emergency fund post.
• Leave room for fun. A budget with no wants in it is a diet, and diets get abandoned. A set amount you can spend guilt-free makes the rest easier to keep.
• Check in once a month. Compare the plan with what actually happened, and adjust. Your first budget will be wrong somewhere, and that's normal.
• Do it together. If you share money with a partner, make the plan together. It's an easier conversation when you're looking at the same numbers.

Why it matters

Every goal you're saving for, from an emergency fund to a house to retirement, needs money that's left over on purpose. A budget, in whatever style you choose, is how you decide that ahead of time instead of finding out at the end of the month. And money you save early gets the most time to grow.

A budget is also permission to spend. I've never had a spending problem; if anything, the opposite. I had to learn to actually spend money, not just save it forever, because otherwise you never enjoy the fruits of your labor. A good budget plans for both.

This is educational, not financial advice. If you're struggling to make the numbers work, a nonprofit credit counselor or a financial planner can help.

What to take with you

• Start with two numbers: last month's take-home pay and last month's spending.
• Pick a style that fits you: every dollar a job, 50/30/20, or pay yourself first. There's no wrong answer.
• Pay yourself first, automatically, by splitting your paycheck in your employer's payroll system.
• Watch your savings rate: what you save ÷ your take-home pay. Try to nudge it up over time, especially when you get a raise.
• Plan for irregular costs, and leave room for fun.
• Check in once a month and adjust.

Want to see how much your savings could grow? Try the compound interest calculator.