Budgeting tips
In the What Would Dad Do? book series and other blog posts, I explain that I use a 1-page annual budget method. I do so mainly because I plan annual financial goals, such as emergency and retirement savings, home maintenance, and vacations, without taking on debt. This allows me to trade off more spending in one area by saving in another because I can always see the bottom line for the entire year.
As you'll read in Tip #3 below, I also opt for the lowest-cost payment method, which can create months with large annual or semiannual payments. In my case, as a homeowner, my property taxes, water & sewer, car insurance, life insurance, house insurance, and estimated federal and state tax payments aren't regular, level monthly amounts; thus, expenses can vary a lot from month to month. Of course, this makes spending uneven across the year, but I have a strategy to deal with it (Tip #2 below). Since it’s nearly impossible to even out expenses across the year, I visualize the unevenness in a cumulative spreadsheet graph of annual income and expenses and use a savings account as a buffer to address that problem.
Here are some budgeting tips to follow if using the 1-page annual budget method.
Tip #1 - Include regular discretionary spending as separate expense lines.
In a previous blog post, I advised against going overboard with too many expense lines. For most people, 25 to 60 lines are sufficient. But if you eat out more than twice a month, you should probably have a separate line to set a spending limit for eating out. The same applies to concert tickets or green fees. Separate expense lines will help you plan and understand the impact of that significant discretionary spending. They also let you compare reality to your estimates, since you can go back and find the receipts to check your estimate.
Tip #2 - Use a savings account to buffer across months.
I recommend keeping emergency savings separate from a savings account because you'll use the savings account primarily to smooth spending month to month, if needed. In months when spending is a bit below average, transfer the excess to savings. Then, in months when a larger semi-annual or quarterly expense occurs, take the extra needed from savings. While this can be challenging if you’re living paycheck to paycheck, the habit of maintaining this small savings account becomes a forcing function for saving for the next high-expense month so you don’t use the credit card. Everyone needs to save enough for such a small savings account, $500 or more, to cover uneven expenses and small emergencies. This account, at the same bank or credit union as your checking account, becomes a visible indicator that you’re on budget. Start the year with $1,000 in savings. As the year goes by, it might go up and down by $1,000, but it hovers around $1,000. At the end of the year, it should be $1,000. If it’s lower, you spent more than planned. If it ends with $3,000, then you can transfer the excess to emergency savings or retirement savings, or give yourself a bigger buffer for the following year.
Tip #3 - Choose the cheapest way to pay.
Some expenses cost more when paid monthly or spread out. In these cases, choose the lowest-cost option and use the savings account buffer as needed. For example, a life insurance policy charges $2.50 per month for monthly payments or $0 if paid semiannually. Therefore, pay semiannually and save $2.50 per month. It may not seem like much over a year, but it adds up if you have several of these. The same applies to credit cards when a surcharge is applied. Save the 3.5% and pay by debit card.
Tip #4 - Adjust monthly
A good habit is to review your budget monthly and adjust as needed. Throughout the year, some expenses will change, and others will be out of your control. Gasoline was $2.81 in January 2026 and rose to $4.48 in May. Depending on how much you drive, you might spend $500 to $2,000 more on gas this year, and that money has to come from somewhere. To accommodate that increase without taking on debt, you’ll need to cut elsewhere. By adjusting your budget now, you’re addressing the impact before it becomes a bigger problem.
Tip #4 - Over plan, under spend
While you should build an accurate budget based on actual expenses and income and deliberately leave a 2% or greater “Under” budget amount for the year, you should also overplan and underspend. For example, you can plan vacations, home improvements, and entertainment at the maximum you would spend on those items and still stay within your budget. Then, as you make those purchases, look for savings so you come in under budget. This excess can then offset other expenses that might be higher than you estimated and can’t control (gasoline) or provide extra to go into savings at the end of the year.
Tip #5 - Plan large expenses to not overlap
To help even out spending across the year, if possible, plan large expenses before or after other large expenses or loan terms. For example, if you plan to buy a car and finance it in June, schedule the roof replacement in March. [If using the Advanced Budget - Monthly or Ultimate Budget spreadsheet, you can set up loans and payments, and the end dates will automatically populate in the budget.] This lowers the amount needed from savings in months without car payments, for example, and reduces the need to take on credit card debt to cover overlapping expenses.
Tip #6 - Assess risk in your budget
For many expenses, you can add an expected inflation factor to account for year-over-year increases. While you can look at last year’s water bills, for example, when entering this year’s budget, you should also add a few percent to cover expected inflation. It’s likely your water bill will be close to your estimate. For other expenses, assess the risks and plan accordingly. Expense lines like health insurance, car maintenance, and rent can easily run much higher than you expect. If your health plan has a higher deductible and high copays, then you should add enough to cover at least the average yearly out-of-pocket expense rather than assume you won’t need a doctor this year. You can always redirect any underspending in these riskier expenses to savings at the end of the year, which is better than having to find thousands of dollars during the year because you needed a major car repair, 8 physical therapy sessions, and because your rent increased mid-year by 5%.
Finally, by regularly managing your financial life with an annual budget, you’ll remain in control, and the task gets easier over time. My budget is easily accessible on my computer’s desktop. I check it often and adjust it throughout the year. I can handle unexpected expenses because I know the plan. While many budgeting methods exist, the 1-page annual budget method I use has worked for me for decades. Whichever budget method you follow, apply some of these tips to do better.
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