The holidays are approaching and with it, the temptation to overspend on gifts, activities, and decorations. Coming up with a budget to keep an eye on your finances is key for a festive season that won’t break the bank, experts say.
But how do you get started? According to money guru Dave Ramsey, budgeting is more than just making a list of what you can and can’t spend.
Ramsey wrote in a post on X (formerly Twitter): “A budget will help you make sure your money is going toward the right things, and you’ll be able to find places where you can cut back. Then you can spend your money on the things you really care about.”
Here are some expert-backed ways to help you carve out your own budget and stick to it this holiday season.
Understand Your Expenses
Mary Anne Ehlert, financial planner and president of Ehlert Financial Group, said understanding your cash flow is especially relevant for the younger generation.
“Young people can’t tell you where their money is going, they don’t know how to budget and save for an emergency, and they may not even be taking advantage of their 401(k) at work,” she said. “They’re not in charge of their money; it’s in charge of them.”
To combat this, she advises pulling out a sheet of paper and pencil or starting a spreadsheet on the computer and entering your monthly income from all sources.
Then, start compiling the “outflows” such as rent, utilities, car payment, student loan payment and credit card payments. Ehlert notes that it’s harder to track gas, food, entertainment and personal expenses — like clothing, haircuts and manicures, but you should try not to leave anything out.
She said, “You have to save receipts and look at credit card statements and then categorize the expenses.”
Identify Your Income
It’s important to know exactly how much money you have coming in each month, said Linda Chavez, founder and CEO of Seniors Life Insurance Finder. This includes salary, bonuses, side hustles and any other sources of income.
Chavez said, “Make sure to also factor in taxes and deductions so that you have a clear understanding of your take-home pay.”
Set Financial Goals
Before creating a budget, it’s equally important to have specific financial goals in mind. This could be paying off debt, saving for a down payment on a house or building an emergency fund.
“Having these goals in mind will give you motivation and direction when creating your budget,” said Chavez.
Cut Unnecessary Costs
To make the most of your budget, Keith Sant, founder and CEO of Kind House Buyers, said it’s important to cut unnecessary costs. This can include things like dining out, buying luxury items or paying for expensive subscriptions.
“Look for ways to reduce these expenses and find more affordable alternatives,” he said. “For example, instead of eating out at a fancy restaurant, cook at home with ingredients bought from a grocery store.”
Manage Debt and Credit
Debt management is crucial for financial stability, said Sherman Standberry, licensed CPA and managing partner at My CPA Coach. He said you should aim to pay off high-interest debts first, as they can quickly spiral out of control.
“Always make at least the minimum payment on all debts to avoid late fees and additional interest charges,” he said. “Credit is a powerful tool when used correctly.”
He suggests keeping your credit utilization low — below 30% of your total credit limit. Also regularly check your credit score and report to ensure there’s no fraudulent activity.
Use Free Resources
“There are plenty of free resources available that can help you save money while still achieving your goals,” Sant said.
For instance, if you want to learn a new skill, you can look for free online courses instead of paying for expensive classes.
Also, Sant said, “If you need to furnish your home, check out websites or apps like Freecycle or Letgo where people give away items for free.”
He added that utilizing these resources can help you stay within your budget while still getting the things you need.
Experts agree that it’s important to be strategic when shopping. This means comparing prices, looking for sales or discounts and being mindful of the quality of items before making a purchase. It also might mean buying secondhand items instead of brand new ones.
Sant said, “Shopping smart can save you a significant amount of money and help stretch your budget further.”
Determine Your Budgeting Method
Chavez said there are many different budgeting methods, such as the 50/30/20 rule or the envelope system. She recommends doing some research and determining which method will work best for you and your financial goals.
Track Your Spending
Finally, once you have a budget in place, it’s important to track your spending to ensure that you’re sticking to it, Chavez advised.
“This can be done through budgeting apps or by simply keeping track in a notebook,” she said. “Seeing where your money is going can also help you identify areas where you may need to cut back.”
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This article originally appeared on GOBankingRates.com: Dave Ramsey Says Budgeting Is More Than Just Making a List of What You Can and Can’t Afford — Here’s How To Get Started