Whether you're working toward specific financial goals or simply trying to make your money stretch a little further, setting a budget is the first step toward building the financial future you want.
At Newrez, we know that every borrower’s path is different. No matter where you are in your journey, knowing a few smart budgeting strategies can help you take control of your finances to improve your chances of qualifying for a future mortgage loan.
1. Define Your Goals
Clearly state what you want your money to do—maybe you’d like to build up your savings, pay down debts or save up for a big family vacation. Then turn those goals into measurable actions, like “put $500 a month into savings” or “limit takeout to $300 a month.” Now you’re ready to draw up a budget.
2. Know Where You Stand
Review your spending habits using your banking app or tracking everything you spend for a month. This includes big ticket items like rent, utilities and groceries to smaller items like coffee runs and streaming subscriptions. That way, you can get a clearer picture of your typical monthly spending habits.
You can also review your monthly expenses using our Budget Calculator.
3. Compare Income to Expenses
Add up all sources of income such as paychecks, benefits and child support and compare them to your monthly expenses. How much is left at the end of each month?
4. Plan Ahead
When you start to create your new monthly budget, begin by anticipating big or seasonal expenses like insurance, taxes or back-to-school costs. Break them into monthly amounts so they don’t catch you off guard.
5. Budget for Emergencies
Don’t let a costly surprise throw off your whole budget. Carve out some money for unexpected costs like car repairs or sudden medical expenses. Even setting a little bit aside each pay period can add up to a decent cushion.
6. Trim Where You Can
This is the tricky part, but now that you have a good handle on your spending habits, you might see some places you can cut back. Some costs are fixed, like your rent or car payment. Others are flexible:
- Groceries: Stick with store brands and search for recipes that call for cheaper ingredients—you might be surprised what delicious meals you can make for less.
- Utilities: Adjust your thermostat to curb energy use, shorten showers and consolidate loads of laundry.
- Subscriptions: Cancel unused streaming or gaming services.
- Clothing: Check your closet for forgotten items and shop clearance racks or thrift stores.
- Going Out: Cut back on rideshares, bars, restaurants and clubs by limiting how often you go out.
- Takeout: Prep meals at home—this could potentially save you hundreds monthly. Set a goal limit, such as only going out to eat or ordering takeout twice a week.
- Extras: Cut back on daily vending machine snacks or pricey coffee, as these indulgences add up. Set a strict “treat budget.”
- Gas: If possible, use public transit or set up a carpool with family or coworkers.
7. Make Saving Second Nature with These Tricks
Make it easier to save with a few of these tips:
- Shop with Intention
Before buying something new, ask: “Do I need this, or do I want it?” Try a 24-hour pause rule to curb impulse spending. - Plan No-Spend Weekends
Challenge yourself to enjoy a weekend without spending money. Explore free local events, go for a hike, host a movie night or start a DIY project. - Automate Your Savings
Set up automatic transfers to your savings account around payday. Even $65 per paycheck adds up to $1,560 a year. - Cook-at-Home Bingo
Turn meal planning into a game. Create a bingo card with different dinner themes like Meatless Monday, Taco Tuesday and Leftovers Night and challenge yourself to fill the card each week. It’s a fun way to save and reduce food waste. - Track and Adjust
Use budgeting apps to monitor spending, set alerts, and share progress with a partner. Revisit your budget every few months to adjust for changes and celebrate small wins.
8. Stay Focused
Budgeting takes discipline because you’re changing old habits and replacing them with new, healthier ones. It takes several weeks to form a habit, but eventually it gets easier—and then you’re on your way to reaching your goals.
We at Newrez wish you luck on your journey to greater financial freedom. We offer a wide array of home loan options and will be ready to chat with you about your future financing when the time is right.