With the cost of living having increased significantly over the past few years, proper budgeting is more essential now than ever. In light of this, WalletHub recently released its report on the States With the Best and Worst Budgeters in 2024, to show where Americans are being the most responsible with their finances and where they need to improve.
WalletHub compared the 50 states across 12 key metrics, ranging from the average credit score to debt-to-income ratios to foreclosure rates.
Budgeters in California (1=Best; 25=Avg.)
Overall Rank: 8th
25th – Average Credit Score
8th – Non-Mortgage Debt as a Percentage of Income
2nd – Credit Utilization Percentage
2nd – Housing Expenses as a Percentage of Median Home Price
3rd – Percentage of Total Non-Housing Expenses to Median Income
For the full report, please visit:
https://wallethub.com/edu/states-with-the-best-worst-budgeters/138069
The top five budget states were Hawaii at number one, followed by Washington, Massachusetts, Rhode Island and Wisconsin. Just a few spots out of the top five was California, coming in at number eight.
On the bottom end, those states with the worst budgeters, included Alabama at number 46, followed by Oklahoma, Georgia, Louisiana and, at number 50, Mississippi.
“Not having a budget sets you up for financial failure. If you don’t carefully plan out and track how much of your income you can dedicate toward each of your expenses and other financial priorities each month, it’s easy for frivolous spending to get out of hand and prevent you from saving money, investing or even keeping up with your bills. Unfortunately, many people were never taught how to budget, so states should strongly consider requiring instruction on budgeting in schools,” said WalletHub Analyst Chip Lupo. “Hawaii is the state with the best budgeters, and it boasts the largest percentage of residents who set aside money for emergency/rainy day funds, at over 64 percent. In addition to showing that people are being responsible by planning for unexpected situations, this also indicates that people are not living paycheck to paycheck and are not spending all their excess money frivolously. Hawaii also has the smallest share of people who only pay the minimum on their credit cards, at just nearly 26 percent, which helps reduce or eliminate interest while improving people’s credit scores.”
Tips for Better Budgeting
Create an Emergency Fund – Set aside a bit every month with the ultimate goal of having at least three to six months’ worth of expenses in reserve in case of an extended income disruption. Even if your budget doesn’t leave a ton of room for this, try to put at least a little bit of money aside each pay period.
Rank Your Expenses – Budgeting doesn’t require you to give up all of your hobbies or creature comforts. It simply means prioritizing the most important expenses over less essential ones. By ranking your expenses in order of importance, you’ll be able to keep what you value most and avoid all the headaches that come with unnecessary debt.
Use the Island Approach – Separate your debt from your everyday expenses. The Island Approach is a strategy that involves isolating different types of transactions to different credit cards for the best possible combination of terms. For instance, you might consider using a rewards card for daily expenses (which you’d pay off in full every month) and a 0 percent balance transfer card to lower the cost of existing debt.
Use the “Avalanche” Method for Debt Payoff – In constructing your budget, make sure to account for monthly debt payments. When distributing those payments, you should pay the minimum on everything but the balance with the highest interest rate, to which you should allocate the rest of your monthly allotment until that balance is gone. Repeat that process with the balance that has the second highest interest rate until you’re completely debt-free. This will ultimately save you the most money on interest and get you out of debt in the quickest time possible.
Don’t Neglect Any Part of Your Budget – When making a budget, bills and other essential expenses should naturally come first. In addition, it’s important to try to put at least a small amount of money toward saving and/or investing each month, so that you can build your wealth and live more comfortably in the future. At the same time, you shouldn’t go to the extreme and save everything while spending nothing on yourself outside of the essentials, as that won’t be good for your mental health.