5 Simple Steps to Create a Budget After 50 — and Stick to It

Baggerly recommends limiting discretionary spending to 20 percent to 30 percent of your take-home pay. “But if you're working toward a big goal, like paying off credit card debt, trimming that percentage can make a big difference,” she says. “The less you spend on non-essentials, the more you can put toward paying down that balance faster.”

Step 2: Determine your priorities

Cagan says people tend to look at budgeting backward: They start by asking themselves what they should cut, when they should be asking how they want to prioritize where their money goes. “When you change that mindset," she says, “it doesn’t feel like you’re depriving yourself.”

When building a budget from scratch, start with the amount of money you need to cover necessities, including any recurring debt payments you have to make. Then factor in an amount you can afford to put in an emergency fund, if you don’t already have one. Plan on setting aside smaller amounts for other future goals until you’ve reached your emergency fund target; once you do, you can direct more money in your budget to your other savings goals, Cagan says.

Put everything in writing to account for where each dollar that comes in should go. Baggerly says she hangs her budget on the refrigerator right next to her weekly meal plan. “This keeps everyone in the family in the know on what our finances look like,” she says.

Step 3: Find ways to balance your budget

If there isn’t room in your budget to cover all of your bills and reach your financial goals, you have two options: spend less or earn more.

When looking for ways to dial down your spending, don’t assume your bills are set in stone. Tiffany Aliche, a financial educator and author of Get Good With Money, recommends carving out a day to cancel subscriptions you’re not using and to negotiate better rates or shop for deals on services you wish to keep. 

This could save you thousands of dollars a year, she says. For example, Walker-Wilson, who is a member of Aliche’s Dream Catchers group, says she cut nearly $300 a month from her spending by dropping cable TV.

Still, Baggerly cautions against making drastic cuts. For example, slashing your dining-out budget by half or more could set you up for failure. You’re better off taking a gradual, more achievable approach so that you don’t get frustrated and give up. 

“Acknowledge your habits and slowly scale back,” she says. “It adds up to savings over the long run and prevents yo-yo budgeting.”

Keep in mind that sometimes it can be easier to bring in more money than to spend less, Cagan says. You could ask for a raise at your current job if you haven’t received one in a while or if you’ve recently taken on more responsibilities, she says. 

Or, pick up a side gig, such as dog walking, rideshare driving or selling homemade products. You could ask an adult child who has moved back home to pitch in for household expenses or pay rent. And, if you got a big tax refund this year, consider adjusting your withholding to keep more of your money as you earn it.

Step 4: Automate your savings

Once you’ve created a budget, Aliche suggests a simple trick for ensuring you stick to it: “Automation is the new discipline.” By that, she means having your money automatically deposited into various accounts to align with your budgeting goals.

“Contributions to a retirement account should ideally come before anything else,” Aliche says, and they can be automatically deducted from your wages. 

Aim to contribute 10 percent to 15 percent of your gross income to a 401(k) or similar workplace retirement account, she recommends. Deposit the rest of your take-home pay into four accounts: a checking account for spending, a checking account for bills, a high-yield savings account for an emergency fund and a high-yield savings account for other savings goals.

If having multiple accounts feels too overwhelming, at least have a portion of your paycheck deposited or automatically transferred into a savings account to ensure that money isn’t spent. “Separating your money makes it inconvenient, and inconvenient money gets saved,” Aliche says.

Step 5: Hold yourself accountable

Although automation makes it easier to be disciplined, don’t just set a budget and forget it. “That is where a lot of people go wrong,” Baggerly says. “It has to be top of mind.”

Every Saturday morning, Baggerly sits down with a cup of coffee and calming music to compare how much she has spent so far that month in various categories versus how much she has budgeted for those expenses. That way, she knows whether she is on track or has to reduce her spending.

Finding someone who can hold you accountable can help you stay on track. Walker-Wilson says that having an accountability partner she met through the Dream Catchers group has been the key to her budgeting success. “If I feel like I’m going to spend, I’ll call her,” she says.