Traffic Light Budget Rule: A Genius Way To Save Money You Likely Haven’t Tried
Written by
Adam Palasciano
Edited by
Cory Dudak
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Budgeting is critical to maintaining your financial health since it allows you to see exactly where your money goes monthly: from your housing costs, savings, utilities, groceries, debt payments and more. The good news? The overwhelming majority of Americans engage in some form of budgeting.
According to Debt.com’s 2024 annual budgeting survey, about 90% of Americans said they were budgeting but, at the same time, 60% of respondents also admitted to living paycheck-to-paycheck. This survey was based on 1,000 respondents.
While this statistic proves that many Americans are budgeting, there may also be room for improvement to stop living paycheck-to-paycheck. Luckily, there’s another lesser-known budgeting method that might help.
How To Do The ‘Traffic Light’ Budget Rule
Erika Kullberg, an attorney, personal finance expert and founder of Erika.com, explained to Forbes that there’s one genius budget rule that you probably haven’t tried but should. Here’s how to do it:
First, write down your spending from the past 30 days on paper. You’ll need highlighters in three different colors to properly code your discretionary expenses like this:
- Green: Highlights purchases that brought you joy
- Yellow: Highlight purchases you don’t remember or that you’re unsure about
- Red: Highlights purchases that didn’t bring you happiness.
“For the red ones, get rid of those completely,” Kullberg explained to Forbes. “Green can stay, yellow you should question. That’s an easy way to budget.”
While Kullberg didn’t specifically call this the “traffic light” budget rule, the analogy is simply a great way to remember it. Tapping into your emotions and seeing how you feel about purchases may allow you to better manage your money and make smarter decisions about how you spend it.
“I think it’s impossible to disconnect money from emotions,” said Kullberg. “Everything about money is emotional.”
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