Whether you’ve recently moved across the world, or you’re preparing to move to a new country, having money in your savings account is very important. Moving abroad comes with many costs, such as buying your plane ticket, transporting luggage or other large items, and finding a place to live, not to mention all the additional costs that occur in the moving process.

One of the easiest ways to prepare for an expensive and important event in your life, or to pay off the expenses of moving, is to create a monthly budget for your household.

If keeping a monthly budget doesn’t sound fun to you, you’re not alone. In the U.S., roughly six in ten people do not maintain a monthly budget, according to a survey by the National Foundation for Credit Counseling.

There are plenty of other reasons to create a budget, such as:

  • if you have other financial goals, like paying for college
  • if you’re trying to save for big purchases, like a car or a house
  • if you want to send money to your loved ones

Having a budget can be one of your most valuable tools to make your money go further and prepare yourself for living abroad. A household budget is key to being smart and efficient with your money.

In this guide, you’ll learn tips on how to budget your money and find several tools and resources that can make the process easier.

Why a household budget will help you in the long run

A budget is the most basic financial planning tool around. And while it can take time to figure out how to create a budget that works for you, it can provide you with a solid foundation for financial success and stability.

When you have big plans that need to be financed, a well-made budget can help. Here’s why:

  • It enables you to understand where your money is going each month.
  • You have more control over how you spend your money, rather than leaving it up to how you feel on any given day.
  • It can help you set goals, track your progress, and see the results.
  • You’ll learn to live within your means while working toward financial goals that are important to you.
  • It allows you to align your spending habits with your priorities.

All of that sounds great, but getting started isn’t always easy.

budgeting tips to help you stay focused

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Budget 101: How to create a budget in 4 steps

At a basic level, subtract your expenses from your income and make sure the difference isn’t negative. You can create a budget in four easy steps:

1. Determine your monthly income

This step will be easy if your income doesn’t fluctuate each month. If, however, you’re self-employed or your hours can vary, take the average of the last three to six months to get an idea of what you can expect to earn going forward.

2. Calculate your monthly expenses

Take a look at your expenses over the last month and assign them different categories. Use as many categories as possible to give you an idea of how you spend your money. You can always consolidate some later to simplify things. Categories can be things such as rent, groceries, medical expenses, and more. You can find some recommended budget categories here.

Also, be sure to add in any recurring expenses that don’t happen every month, such as an annual membership or semi-annual insurance premiums. Divide those expenses, so you know how much they cost you each month.

Finally, include your monthly savings goals and extra debt payments, if applicable.

3. Create your first monthly budget

Add up all of your expenses from the last month and subtract them from your monthly income amount. You can do this on paper, or with a budget worksheet or an online budget calculator. Now you’ve created your first monthly budget!

If the difference is negative, you’ll need to adjust some things to make sure you’re living within your means.

But if you still have some money left over, you can choose where it goes. Before you decide to spend it, consider putting it toward savings or paying down debt.

4. Keep track of your expenses

Creating a budget won’t do you any good if you don’t hold yourself to it. As you go throughout the month, take time at least once a week to add up your expenses to make sure you’re on track with your budget.

While calculating your budget, consider whether you need to make adjustments. If it’s the middle of the month, for instance, and you’ve already spent $300 of your $400 grocery budget, either your budget was too conservative or you’re overspending.

Be honest with yourself about which one it is, then make an adjustment to make sure you don’t go over your overall budget for the month. That may mean taking money from another category or lowering your savings or extra debt payments for the month.

4 helpful budgeting methods

Creating a budget by yourself can be daunting, but the last thing you want is to start one then stop after a few months. The key to creating a budget that you won’t end up quitting is finding what works best for you.

There are several different budgeting methods out there. While some of them require a lot of planning and tracking, others focus more on general spending trends and don’t take up as much time.

As you consider each family budget method, consider your preferences and pick the one that would best help you achieve your goals without making your life too complicated.

Zero-based budget

With this budgeting method, the goal is to have your monthly expenses equal your monthly income exactly. In other words, you’re deciding exactly how every single dollar you earn is spent.

To optimize a zero-based budget, it’s best to include your monthly savings and debt goals. This approach is great for people who want to develop discipline with their spending and like the idea of knowing exactly where their money is going.

If you end up overspending in one area, however, there’s no buffer. This means you’ll need to take money from another spending category to make up for it. It’s also a good idea to keep a few hundred extra dollars in your checking account in case you go over budget enough that you can’t make up for it.

Envelope system budget

This budgeting method, popularized by Dave Ramsey, favors using cash instead of a debit or credit card for all of your spending. With this approach, you’ll determine how much you’re going to spend in each category, such as groceries, rent, utilities, and more.

Next, you’ll go to the bank and withdraw enough cash to cover all of your spending for the month — you can also do it weekly or bi-weekly — and divvy it up between envelopes designated for each category.

Like the zero-based budget, the idea is to stick with what you budgeted for a single category. If you run out of cash from one envelope, you take some from another envelope instead of going to the bank to get more.

Because there are a lot of moving parts with this budgeting method, it’s not the best option for people who don’t want to deal with that kind of organization. It’s also not a good fit for people who prefer earning rewards with their credit cards.

But if you like the idea of using cash and want to develop the discipline required to use this approach, it’s worth considering.

50/30/20 budget

The 50/30/20 budgeting method assigns all of your expenses to one of three categories: needs, wants, and financial goals. The idea is that 50% of your monthly expenses should go toward your basic needs, 30% toward your lifestyle, and 20% toward saving and paying off debt.

The approach is much simpler than the zero-based budget, and could be a good option for someone who wants to budget but doesn’t want to feel overly restricted.

Avoid taking the 50/30/20 proportions as gospel, though. If you have a large student loan or other debt payments or have big savings goals, it may be worth using 50/20/30 or 50/15/35 as your proportions instead. The nice thing is that you get to choose.

Pay-yourself-first budget

The pay-yourself-first budgeting method is the simplest of all. The idea is to add up your necessary expenses, such as rent, utilities, and debt payments, and add in savings and extra debt payments.   

Once you set that aside, though, you can do whatever you want with the remaining portion. There’s no need to track your spending regularly; you just need to make sure you don’t overdraw your checking account. One way to avoid this is to take some of your remaining portion out of the bank as cash, and only use that for your additional spending.

It’s always a good idea to pay yourself first, but this budgeting approach makes it a priority. It’s a good option for people who struggle with saving each month but don’t want a complex budgeting program.

4 easy budgeting methods

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Budgeting tips to help you stay focused

If you’re afraid you might not stick with a budget over time or you feel like it’ll be too much work, here are some budgeting tools and tips to help boost your confidence.

Skip the pen and paper

Even if you’re old-fashioned and prefer pen and paper, writing out your budget and tracking your expenses by hand can take up a lot of time.

At a minimum, consider using a budget spreadsheet as your monthly budget planner and tracking tool. If you’re not spreadsheet-savvy, try out a monthly budget template to help you with the formulas and calculations.

Use a budgeting app

Budgeting apps like Mint, You Need a Budget, and PocketGuard are all designed to do a lot of the legwork for you. For example, some allow you to connect all of your bank and credit card accounts, and they’ll import your transactions into one place. That way, you don’t have to log into each of your accounts to track your expenses.

They can also provide you with a basic household budget template that you can customize based on your unique financial situation.

While some budgeting apps are free, others charge for their service. Be sure to pick the one that best suits your needs and your wallet, but you should also consider that spending a few dollars per month on an app that can help you save hundreds of dollars a month is usually worth it.

Remember your ‘why’

Budgeting is rarely anyone’s idea of fun. But if you have financial goals you’re working toward, a budget can help you get there.

It’s important to remind yourself why you budget, especially during times when you don’t want to. For example, if you’re saving for a big family vacation, make a photo of your destination the background on your computer. Or if you’re trying to eliminate debt, make a list of things you want to do with the extra money you’ll have when you’ve paid off your last loan.

Regardless of your reason for budgeting, reminding yourself regularly can help you stay focused.

The bottom line: Budgeting helps you save more money

A budget can be a powerful financial tool, but it won’t work unless you use it. As you start budgeting, consider various methods and tools to ensure that your budget is best for you. Then do everything you can to stick to it each month.

Over time, you may notice that your financial situation or preferences change. At this point, it’s important to realize that you’re not stuck to your current budget. You can always switch to a different budgeting app or try a new method to see if it works better for you.

Most importantly, consider why you want to budget. Remember your reason to stay motivated.