5 Ways You Can Make a Budget You’ll Actually Stick To

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Although it may seem like common practice for adults to create a household budget, just 35 percent of people are active budgeters who follow a strict budget and don’t regularly overspend, according to a recent Willis Tower Watson survey.

“A budget that provides for regular saving and investing will pave the way for life’s rough patches and significant expenses,” according to Warren Ward, certified financial planner and founder of WWA Planning & Investments.

Ward describes budgeting as the “most important thing someone can do.” However, a budget will only be effective if you can live by it, which is easier said than done. Find out how you can create a successful budget for your lifestyle.

How to make a budget that works for you

If you want to make a budget you can actually stick to, here are five key budgeting tips you should follow.

1. Before you make a budget, track your spending

When you make a budget, you’re not making a wish list. You’re creating a document you can follow. This means it needs to be realistic based on what you’re currently spending. U.S. News & World Report recommends tracking your expenses for at least 30 days before trying to make a budget.

After all, if you don’t know what you’re currently spending, then you’ll just be making a bunch of guesses and likely set unrealistic goals. For example, if you’re spending $600 a month on food right now, budgeting $100 a month is setting yourself up to fail.

Tracking your spending for a month will give you a framework to make a budget that works for your lifestyle. If you find you’re spending too much on a particular category, such as eating out, you can adjust those numbers in your budget.

2. Consider a simple budgeting approach

There are lots of different approaches to budgeting. Financial expert Dave Ramsey recommends a zero-based budget in which your budget accounts for every dollar of income you earn. While some people need this level of discipline, others find that type of budgeting stifling.

“Often creating a budget and sticking to it can be overwhelming,” said Magdalena G. Johndrow, certified fund specialist and associate financial advisor at Farmington River Financial Group. “After all, who wants to track every single latte they drink?”

Johndrow’s recommendation is to use a 60/40 budgeting approach, which involves allocating your money into different “buckets” (categories) as follows:

  • 60 percent of your money is allocated to required spending items such as housing, utilities, taxes, and food.
  • 10 percent of your money is allocated towards retirement. This money may be in tax-advantaged retirement accounts, such as an IRA or 401(k), which come with tax penalties for early withdrawals.
  • 10 percent of your money is allocated towards long-term savings. Although this money is invested, it should be accessible.
  • 10 percent of your money is allocated towards short-term savings for things like vacations or car repairs.
  • 10 percent of your money is yours to spend on anything you want during the month.

There are different versions of this percentage-based budgeting system. For example, Mint explains that U.S. Senator Elizabeth Warren popularized a 50-30-20 budget in which:

  • 50 percent of your money goes towards covering needs (groceries, rent).
  • 30 percent goes towards covering wants (traveling, dining out, entertainment).
  • 20 percent of your budget is put towards savings and debt repayment.

The big benefit to this approach is you don’t have to rigidly adhere to strict rules about what each dollar is spent on, which can be difficult to stick to over time.

3. Build in some wiggle room

Unexpected expenses are bound to crop up during the month, which is why Dave Ramsey and other financial experts recommend providing a buffer in your budget.

If you’ve assigned every single dollar you have to a savings account or a specific category of spending, you won’t have enough money available to cope with a surprise expense. By planning to have at least some money go towards “miscellaneous” expenses every month, you’re less likely to go over your budget.

The amount to allocate towards unexpected expenses will vary depending on how much money you have. Many experts recommend anywhere from around $50 to $200 as a buffer to cover surprise expenses.

4. Don’t forget irregular expenses

According to a Prudential report on the State of Financial Wellness in America, 43 percent of employees surveyed never or rarely planned for irregular expenses. Irregular expenses are bound to crop up, though, whether you’ve planned for them or not. Irregular expenses could include everything from holiday or birthday presents to an oil change or car registration.

To account for irregular expenses, look at your calendar or look back at credit card statements over the course of several months. Look for annual, bi-monthly, or occasional expenditures, and account for these if you make a detailed budget.

If you have large expenses that come up periodically throughout the year — like high costs for holiday gifts — you can also avoid blowing your budget by using a savings account to put a small amount of money aside throughout the year. That way, you won’t have to come up with a huge amount of money all at once that makes it impossible to stick to your budget that month.

5. Automate spending when you make a budget

One of the key ways to make sure you stick to your budget is to make it effortless.

“Reviewing budgets each week or each month is hard to do. Especially if you have a young family,” explained Michael Solari, a certified financial planner for Solari Financial Planning, LLC.

Instead of manually monitoring spending and moving money to where it needs to be, Solari and many other experts recommend automating many financial transactions.

“If you can set your paycheck to automatically flow into each of your buckets, you are guaranteed to save,” Johndrow said. “Having your money automatically withdrawn from your paycheck will also limit your spending, making it more likely you stick within that 60 percent budget. You’re paying yourself first before spending your paycheck.”

This doesn’t necessarily work for every person, though.

“Some people like to be more in control day-to-day and may not be comfortable being certain there will always be enough funds to cover their bills on autopay, “ Ward said.

However, for many, it’s much easier to automatically transfer a desired amount of money to savings accounts then live on the leftovers rather than watch every dollar.

Choosing budgeting tips that are right for you

Ultimately, everyone handles money differently. If you want to make a budget you can live on, the key is to try out different budgeting approaches until you find one you can stick to for the long haul.

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.