damircudic / E+ / Getty Images

How to create a budget, stick to it and save using apps and card rewards

During times of change, such as the coronavirus crisis, having a budget is absolutely essential. Here's how to do it


If you want to create a budget, start by breaking down your expenses into four major categories. Then use apps and online tools to stick to your budget and save. Here’s how.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Household budgets are important, even during the best of times. Without a budget in place, you’re banking on the idea that every money move you make will work out fine. But if you have a budget in place, you know much you can afford to spend and have the money earmarked to pay your bills each month.

But during times of change, having a budget is essential. For example, if you lose your job or have a temporarily lower income, you may not be able to make ends meet if you continue to spend like normal. Or, you may not make the best decisions for your money. If you have an old budget that doesn’t reflect changes to your income and expenses, it could cause similar issues.

Many people still shy away from creating a budget, though, as it can seem complicated or too restrictive. But the reality is that it doesn’t have to be. You can create a budget that’s as simple or complex as you want, and there are lots of tools you can use to help keep your budget on track. In fact, you can even use credit cards, rewards points, shopping portals, budgeting apps and online coupons to help create a budget, save money and earn bonus dollars. That can help you meet your savings goals and stay under budget. Here’s how you can do that.

See related: How to create a budget that works for you

Start with your income

Your income is the most important category in your budget. Until you estimate how much you can spend, it’s impossible to create a useful budget.

To start, make a list of the income sources you expect to have, which may include:

  • Monthly salary or wages
  • Retirement income
  • Unemployment income
  • Other government benefits
  • Other income, such as freelance income, rental income or legal settlement money

See related: Coronavirus: What to do if you’re unemployed and have credit card debt

Break your expenses into the ‘big four’ categories

One way to simplify the budgeting process is to break your monthly expenses into the “big four” expense categories, which include:

1. Housing

Most people’s housing expenses remain the same each month. You pay monthly rent whether you’re renting or have a mortgage on a home you own. But housing expenses also include your monthly utility bills and any regular maintenance expenses.

It should also include expenses you may not pay every month, such as property taxes and home insurance (if they aren’t included in your mortgage payment). If you are renting, don’t forget the cost of your renter’s insurance policy. Add up all the costs and divide the total amount you pay annually by 12 to determine the monthly average cost.

2. Transportation

This category includes your monthly car payment, your monthly auto insurance costs and the cost to fill up your car’s tank if you drive a gas-powered vehicle. Even if you don’t own a car, you still likely have transportation expenses, like the cost take public transportation or taxis and ride-sharing services. Add up these costs to determine what you’re spending each month.

3. Food

Estimate what you spend at the grocery store and at restaurants or for takeout each week. Use that figure to estimate what you spend during an average month.

4. Non-mortgage debt

Include student loan payments, credit card debt and any other debt payments in this category.

See related: How many credit cards is too many?

Calculate other miscellaneous expenses

Don’t forget any other regular expenses you have, such as:

  • Child care
  • Cable bill
  • Cellphone bill
  • Entertainment
  • Gym memberships
  • Health insurance and medical expenses
  • Other insurance, such as life insurance and umbrella liability insurance
  • Tuition
  • Miscellaneous small expenses

Make your budget work

You can use a spreadsheet program, or even pencil and paper, to quickly make a basic budget. However, technology can make budgeting and tracking expenditures much easier.

Grant Gallagher, financial education manager at Basking Ridge, New Jersey-based Affinity Federal Credit Union, recommends apps such as Mint, You Need a Budget and PocketGuard. These apps will keep track of your spending to help you stay on track during the month. They also provide advice and tips to help you manage your budget successfully.

“Budgeting has changed dramatically,” Gallagher says. “People used to save receipts in a shoebox or plug in their transactions in a spreadsheet. Today, you have apps that not only track transactions but look at them on a monthly basis and visualize the data for you. People who are fans of sticking their heads in the sand don’t have an excuse anymore to not budget.”

After you create your new budget, either by hand or using a software app, you can see where you stand financially.

If your first try at a budget shows more expenses than income, you’ll need to find ways to make up the difference. You might be able to find alternative sources of income to help cover the difference. But just knowing where you stand in the new reality can help you rein in expenses. If necessary, you may make temporary cuts, such as slashing online services or purchases for take-out and dining out.

Leverage credit card rewards to stretch your budget

Kyle Kroeger, founder of the personal finance site Millionaire Mob, uses his credit cards strategically to earn the most rewards points or cash-back bonuses possible, and recommends a similar strategy if you’re looking for ways to stretch your budget. By racking up cash-back bonuses, you can save money on everything from dining out and groceries to car maintenance. But it all comes down to how you use your cards.

For example, if you have a credit card that offers cash back every time you use it to fill your car’s gas tank, the savings can reduce the amount you spend on gas every month, keeping you from overspending on these budget items. Or, if you have a card that provides cash back on grocery store purchases and you only buy groceries with that card, you can shave down your food expenses each month, Kroeger said.

“I tell people to take advantage of those rewards points,” Gallagher said. “If you can get 2% back on everything you buy, and you are going to buy those items anyway, why not throw it on the card? That cash back is a bonus that you can use to reduce your expenses.”

Use cash back to pay down debt

Rewards points can also help you pay down your credit card debt. When you earn cash back, fuse that cash to pay down what you owe on your credit cards.

If you budget $500 a month for paying off debt and you earn a cash-back bonus of $100, you can apply that bonus to your debt.

You’d then only have to come up with $400 on your own to meet your goal for that month.

See related: How to redeem cash back

Take advantage of credit cards as a planning tool

There’s another benefit to using credit cards: Each credit card statement will list what you spent money on. This can help you track your expenses each month.

It’s important to pay off your credit card balance each month to avoid interest. But if you use your cards wisely, you’ll likely find it easier to track your purchases and earn rewards points to lessen your monthly expenses.

Add online shopping portals to your budgeting strategy

Online shopping portals such as Rakuten and Swagbucks can also help reduce your monthly expenses. Jaquetta Ragland, the Winston Salem, North Carolina-based owner of YoungandFinance.com, agrees that shopping portals, coupons and rewards points can save you plenty of money.

This can be useful, but only if you plan on buying those items anyway.

“Coupons can save families and individuals a lot of money, but not if you’re going to buy items you know you’ll never use,” Ragland said. “It isn’t wise to use credit cards on items you don’t need just to earn points. My motto is, ‘Work the system. Don’t let the system work you.’”

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

Credit Card Rate Report
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more