Making a budget gives your money a fitness plan. Here's how to spend like a pro.

By Morey Stettner

These budgeting tips can ease your financial worries

Budgeting strengthens your relationship with money.

As the year draws to a close, it's an ideal time to think about your personal or family budget.

There's a right and wrong way to do that.

"Go into the process with an intent to find out what you want to achieve," said Jared Sweeney, a Boston-based certified financial planner. "What's your goal? It might be paying down debt or increasing your investments. That's your starting point."

At the same time, it's important to look back and assess your track record for the past year. Did you accurately estimate how much you'd spend in certain categories? Did you set reserves for unexpected expenses? Did you meet your financial goals from one year ago?

"Understand what went well and what didn't go well, and the reasons you did or did not meet your goals," Sweeney said.

Of course, this assumes you set a budget a year ago. "You're way ahead of the game if you did," said Anora Gaudiano, a New York City-based certified financial planner.

Many people treat budgeting as a nuisance and skip it. Or they occasionally ponder their spending and saving, which gives them a rough approximation of their cash flow without helping them determine if they're on track.

Today, it's both easier and harder to master the art of budgeting.

It's easier because an ever-growing number of budgeting apps help streamline the process. Examples include Monarch and YNAB (You Need a Budget). At a basic level, these apps - whether free or paid - help you track expenses and chart your progress toward meeting key goals.

Budgeting is harder because money flows in and out of our hands in myriad ways that are sometimes difficult to trace. "Fifty years ago, everything ran through your checkbook," Sweeney said.

In addition, budgeting gets tricky because it requires looking at both the future and the past with a detailed focus - projecting future costs while analyzing past expenses.

Ideally, budgeting strengthens your relationship with money. Every dollar coming in and out has a purpose. You hold yourself accountable for saving and spending. And that in turn prevents you from aimless or unthinking financial behavior.

That's why many financial planners urge clients to treat budgeting as an ongoing activity rather than a year-end chore. "It's always the right month to budget," Gaudiano said. "If you wait till December to do it, then you're probably spending more money than you should" throughout the year.

Year-round tracking is especially useful when the economy is experiencing high inflation. Ever-increasing premiums for health insurance or home insurance can prove volatile. Grocery bills can be hard to predict.

The best practice is to add between 5% and 10% to your budget as a buffer to protect against price spikes and emergency expenses. That's difficult for many people, so it's important to be flexible. "When you set a budget, it's dynamic," Sweeney said. "It's not set in stone and you have to shift as you go."

Perhaps the biggest trap when setting a household budget involves your attitude. If you estimate spending to reflect what you want to happen - as opposed to what will likely happen - you're on shaky ground.

Experienced budget-makers establish a baseline by looking back two or three years and analyzing their overall spending, said John Ryan, a certified financial planner in Charlotte, N.C. That way, there should be fewer surprises with their money in the coming year.

"When people set a budget, it's often not based on reality," Ryan said. "It's based on what they want their spending to be. It's aspirational. Then they fall back into their bad habits."

More: Americans are starting the new year with record debt. Here's how they can get it under control.

Also read: Your estate plan needs to be absolutely airtight. Here's how to avoid mistakes.

-Morey Stettner

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12-27-25 1559ET