How to budget money: smart budgeting tips that make it easy

Budgeting doesn’t need to be hard. Our budgeting tips show you how you can start saving today!

7 min read

Although it may seem daunting, working out how to budget your money doesn’t need to be hard. With these budgeting tips, saving up for your short and long-term goals will seem effortless. Even if you’re wondering how to budget money on low income, we’ve got you covered with smart methods such as the 50/30/20 budget rule.

Read on to find out how to budget and save money below:


The first step to creating a budget is to determine exactly why you want to start saving money. As research from the International Journal of Management, Business and Administration shows, the key to success in any endeavor is to create specific, yet challenging objectives. Getting to grips with what is motivating you to save can go a long way to creating some clear, achievable goals. This helps you to stay focused and on track, even when things aren’t so easy.

Here are some questions you might want to ask before making your budget:

  • What is important to you? For example, do you live for travelling, do you dream of becoming a homeowner, or would you like to save up for studying?

  • What is a realistic, yet challenging, goal that you would want to save for?

  • Is this goal motivating enough that you will want to stick with it, even if there are periods in which saving becomes a little tricky?

Once you’ve asked yourself why you want to start saving, our next budgeting tip is to divide your savings goals into short and long-term plans. Short-term savings goals might include saving for the following:

  • An expensive piece of furniture

  • A vacation

  • A downpayment on a car

  • An emergency fund

Long-term savings goals might look like:

  • A deposit for a flat or a house

  • Paying off any long-standing debt

  • Starting up your own business

  • A trip around the world

Having a combination of both short and long-term saving goals can make the larger goals seem less intimidating. As you gradually achieve your short-term goals, you realize how possible it is to save money and be in control of your finances, making your long-term goals feel increasingly attainable.

Before starting your budget, you should consider whether your short and long-term savings goals are realistic. There’s nothing more demotivating than setting an idealized, yet totally unattainable goal, and watching it become increasingly impossible to achieve.

A fantastic personal budgeting tip is to follow psychologist Edwin Locke’s SMART goal-setting method. SMART stands for: Specific, Measurable, Attainable, Relevant, and Time-bound. As long as your budgeting goals adhere to each of these five categories, they’re realistic enough for you to start your budget.


Many of us resist doing it, but if we want to start budgeting effectively, we need to understand exactly how much is coming in and out of our account every month. The best way to do this is to track all of our incomings and expenditures over a 30-day period. This means being aware of each and every transaction, either noting it down in a spreadsheet, or using a budgeting app such as You Need a Budget.

Once you’ve got a good overview of where all your money is coming and going each month, the next step is to separate your expenditures into fixed and variable costs. Fixed costs would cover:

  • Rent

  • Heating and electricity bills

  • Insurance costs (i.e. car, personal liability or property)

  • Student loan repayments

Variable costs would include:

  • Grocery shopping

  • Entertainment (i.e. nights out, cinema trips, concerts)

  • Clothes shopping

  • Eating out

While your fixed costs do not offer you much––if any––flexibility with regards to saving, your variable costs do. This doesn’t mean that you have to stop going out and having fun, it just means being smarter with your money. Here are some budgeting tips you might want to consider to lower your variable costs:

  • Instead of going out for lunch at work, start prepping your meals at home beforehand.

  • Consider if you really need to upgrade your phone to the latest model if your current model is working just fine.

  • Choose one day a week where you don’t spend anything on variable costs.

  • Adopt the save now, spend later technique. This means setting aside your money for your savings goals and fixed costs at the beginning of the month and only using the remaining balance to pay for your monthly variable costs.


Having worked out why you want to budget, what you want to save for, and what your fixed and variable costs are, it’s time to work out how much you want to save each month. Of course, this varies dramatically from person to person dependent on income, whether you are a freelancer or a full-time employee, your living circumstances and responsibilities, but here are our tips on budgeting your money in accordance to your lifestyle.

The 50/30/20 rule encourages your budget to look as follows:

  • 50 percent of your income goes towards your “needs,” i.e. your fixed costs such as rent and bills.

  • 30 percent is allocated to your “wants,” i.e. your variable costs such as eating out, trips to the hairdresser and clothes shopping.

  • 20 percent goes into your savings or towards paying off debt.

The 50/30/20 rule was actually popularized and created by US senator Elizabeth Warren, a bankruptcy specialist at Harvard, as a way to show American citizens how to budget and save money and how to budget money on a low income.

If you decide to opt for the 50/30/20 method, it might be worth considering automating your expenses each month. This means that your income is automatically divided at the beginning of the month in accordance with the 50/30/20 rule. By doing this, you’ll only be left with the 30 percent allocated to “wants” in your bank account, which you can then spend during the month without worrying about whether you are overspending or not meeting your budgeting goals.

The zero-based budgeting method differs slightly from the 50/30/20 approach in that it looks at assigning each penny a specific job. At the end of the month, all income minus all expenditures should equal zero; there should be no left-over money in your account.

This means fine-tuning your budget so that you know exactly how much you are spending on your fixed, variable and savings costs each month, to the cent. This is a very detail-orientated approach to budgeting, and means that you need to be acutely aware of all of your monthly transactions, as they happen.

Life always comes with a few surprises, so it’s a good idea to have a budgeting contingency plan for when things get a little complicated. One of the best budgeting tips is to prepare for those months where you may not be able to stick so closely to your budgeting plan. This stops you from becoming demotivated and losing track of your budgeting goals completely.

Here are some budgeting money tips for creating a contingency plan:

  • Factor in saving for an emergency fund as part of your budget. This could mean saving five percent of your income every month for those unforeseeable circumstances.

  • Create a fallback budget which you refer to in an emergency. This budget cuts out everything that isn’t essential for everyday life, i.e. variable costs. This frees up some money to use in an emergency.


Looking for the perfect way to put all of these budgeting tips into action? With N26’s free bank account, you can track each and every transaction by being notified when any money enters or leaves your account. Plus, the Spaces feature allows you to set up several sub-accounts and to assign a savings target to each of them. This means you can keep a close eye on how close you are to reaching your goals. Check out our list of budgeting features for more.

Your financial wellbeing and getting the most out of your money are important. Whether you’re looking for budgeting tips for students, trying to get to grips with the basics of money or saving up for a big investment, making your money work for you is key for a balanced, healthy lifestyle.


expertprogrammanagement(Locke’s SMART method) Goal-Setting Theory of Motivation by Fred C. Lunenburg

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