What is the #1 rule of budgeting?

The #1 rule of budgeting is to not spend more than you earn. By spending less than you earn, you can avoid going into debt, save money for future financial goals, and ensure that you have enough money for must-have expenses moving forward.

Even though budgeting’s primary focus is to make sure you don’t spend more than you earn, there are a few other important budgeting rules worth following as well. Sticking to these guidelines will make your budgeting efforts much more successful.  

7 Budgeting Rules to Follow

1. Don’t spend more than you earn. The purchases you make each month should add up to less than your monthly take-home pay.

2. Prioritize essential expenses over discretionary spending. Make sure you have money available for necessary expenses, such as rent and groceries, before you spend money on nice-to-have purchases, like video games and dining out.

3. Create a budget and stick to it. Make a budget that lays out how you will divide your income among your expenses, and make sure you adhere to your budget as you spend throughout the month.

4. Track your spending. Track how much money you actually spend to make sure you are not going over your budget. You can use a budget app like WalletHub to track your transactions automatically.

5. Pay yourself first. Every time you get paid, set money aside for savings before making any purchases or bill payments. This is called the pay-yourself-first method.

6. Avoid impulse purchases. Impulse purchases are non-essential things that you buy without any prior planning, which can cause you to go over your budget. Make sure to give yourself time to think about whether you really need or want an item before you buy it.

7. Review your budget regularly. Go over your budget and transaction history every week or every month to make sure you are not overspending. This also gives you an opportunity to adjust your budget for any changes in income or spending.

How a Strategy Can Help With Budgeting

A budgeting strategy like the 50/30/20 rule or zero-based budgeting can also provide some rules for organizing your budget. For example, with the 50/30/20 rule, you allocate 50% of your income to needs, 30% to wants, and 20% to savings. The zero-based budget strategy requires you to assign every dollar of your income a specific purpose, so that subtracting your expenses from your income results in zero every month.

No matter what budgeting strategy you choose, you’ll need to follow the number one budgeting rule, which is to not spend more than you earn. To learn more, check out WalletHub’s guides on how to budget and the keys to successful budgeting.