The 10 Commandments of Budgeting

  • Thou Shalt Make a Budget!

    Does the thought of doing a budget make you cringe at the sight of an Excel spreadsheet? Fear not, budgeting novice. Creating a budget can actually be fun and is one of the most useful tools for telling your money where you want it to go. Whether you’re scrounging for a new set of wheels or have your eye on a jaunt to Bali, setting up and living by a budget ensures you will enjoy your money responsibly and make the most of it. MainStreet asked the personal finance gods (OK, financial planners) for tips on setting a budget, so read on as we reveal their 10 commandments of budgeting. Just like the real commandments, they are sage rules to live by as you manage your finances. Photo Credit: Getty Images
    Thou Shalt Know Your Values
  • Thou Shalt Know Your Values

    Before you set up a budget, first decide what you really want to buy, says Stuart L. Ritter, a certified financial planner with T. Rowe Price. “There’s often a disconnect between what people value and whatever resources are available,” he says, but “thinking through your values and making sure your budget and the way you spend your money reflects those can help you avoid regret later on.” Something else you’ll avoid by knowing your values: buying on impulse. Photo Credit: Getty Images
    Thou Shalt Keep it Simple
  • Thou Shalt Keep it Simple

    “So many times when we set out to make a budget, we think, ‘Oh, I’m going to create this great system that tracks when I’m eating out alone, eating with my friends and eating with my family,’ but all this detail makes it difficult to track,” says J.D. Roth, who founded the personal finance blog, Get Rich Slowly. “To me, the ideal budget is the simplest budget that gets the job done.” J.B. Orecchia, the CEO of, a personal finance network that includes budgeting tools and resources, suggests budgeters get started by organizing expenses in categories that make sense to them. These categories may include housing, discretionary spending, such as movies and meals out, current debts (if you have any) and, of course, any specific savings goals. It can also help to track spending in a certain category for a month to understand your current habits and what should be set aside for them. Another way to make budgeting less intimidating is by focusing on one area of spending, such as dining or your comic book obsession. “They can say, ‘I know I have problems with eating out,’ and go from there,” Roth says. Just remember, if it's too complicated, you'll be less tempted to keep track. Photo Credit: Getty Images
    Thou Shalt Be Realistic
  • Thou Shalt Be Realistic

    The bad apples of budgets are those based on fantasy, says Roth, so keep yours grounded in reality. “Don’t budget based on a raise you think you will get or a tax refund you think you have,” he says. “I need you to budget based on what you know you actually have and know you will get, and based on how you spend your money." On this note, when looking at bills and other expenses, always go to the source (i.e., statements) for the hard and fast facts. Never estimate a cost, says Roth, and always base your income on your take-home pay, which reflects what you earn after taxes and any employee benefits – like health care and reimbursed transportation – are factored in. Photo Credit: Getty Images
    Thou Shalt Save for Emergencies
  • Thou Shalt Save for Emergencies

    The finance gods command you to use your budget to save for emergencies. After all, who knows what will happen? “One month, your car will need an extra repair, or your laptop will break,” says Ritter, the financial planner. “Things happen. If you recognize they’re going to happen, and you’re setting aside money every month to pay for these things when they happen, people will be in better shape.” Aim to shore up enough funds to cover half a year of living expenses, says Ritter. “Three to six months is good,” he says, although it can never hurt to add more. If you’re still not convinced, check out MainStreet’s breakdown of why saving for emergencies is a smart money move. Photo Credit: Getty Images
    Thou Shalt Plan for Retirement
  • Thou Shalt Plan for Retirement

    “Saving for retirement should be in your budget all the time,” says Ritter, especially if you’re a baby boomer with major expenses on the horizon like health care bills and life insurance. But don’t forget that budgeting for your retirement can be for fun stuff, too. Setting that money aside will help you advance toward a solid savings goal like buying that condo in Florida, and you’ll be less prone to kick yourself for not being able to afford that condo later. If you’re nearing retirement, check out MainStreet’s primer on the bad habits to break before then. Photo Credit: Getty Images
    Thou Shalt Save for Budget Busters
  • Thou Shalt Save for Budget Busters

    Splurging on holiday gifts or a new set of car tires will set you back if you don’t plan for it, says Orecchia, but every year you can always count on these costs so you can plan ahead. “You can almost picture it crushing your budget come Christmas time,” he says of these so-called budget-busters, “but most people really don’t plan for them in advance.” Spare the shock to your wallet by setting aside money each month in multiple savings funds. And as you budget, it may also help to name each fund for memory’s sake (think “New Car Fund” or “Contact Lenses”). Photo Credit: Getty Images
    Thou Shalt Be Flexible
  • Thou Shalt Be Flexible

    What you buy and value will change over time, Ritter says, so as the years pass, make sure to review and amend your budget each year so that it reflects your ever-shifting needs and wants. Photo Credit: Getty Images
    Thou Shalt Include Your Significant Other
  • Thou Shalt Include Your Significant Other

    If you’re currently co-mingling your funds with a significant other, do the budget together, advises Ted Beck, CEO and president of the National Endowment for Financial Education. Not only does this ensure that you’re both working toward the same goals, it may also help you dodge fights about money in the future. Photo Credit: Getty Images
    Thou Shalt Do What Works for You
  • Thou Shalt Do What Works for You

    Along with finding and knowing your values comes the commandment of doing what’s right for you. No two budgets are created equal, says Roth, nor should they be—we all want our money to do different things. “For some people charity isn’t important at all, but maybe for you, charitable contributions are important,” says Roth. “You need to do what works for you, and I mean find something that’s effective you and using it. I have friends that keep a pencil and paper budget. There’s no one right way to do this.” If your financial life is worry-free, then enjoy the fruits of your labor. No matter how you got there, you’re there! Photo Credit: Getty Images
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