Effective budgeting is a tip that is essential, especially as the cost of living continues to rise across the U.S.. WalletHub experts have recently released a report—States with the Best and Worst Budgeters in 2025—that shows how Americans are navigating their finances and the areas that need growth.
In the report, California ranked as the 12th on a scale of 1 being the best state of budgeters and 25 being the worst, or in this case, average, according to the report. The top three states with the best budgeters include Hawaii, Washington, and Massachusetts.
WalletHub Analyst Chip Lupo said, “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.”
He continued, “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.”
The report discussed the most efficient ways to budget and maintain healthy finances, the most common mistakes people make with budgeting, tips for getting out of debt, tips for low-income families, and the best way that parents can help their children learn the skill set of budgeting.
Associate Professor and Director of Financial Planning and Financial Literacy at the University of Charleston, Jacob Tenney, Ph.D., said, “They [people] don’t pay themselves first,” and that saving is the first step. “Too often, saving is the last line item on the spending plan, or it is not on the spending plan at all.”
WalletHub then compiled a list of five tips for better budgeting that include:
Rank your Expenses—Most people think that budgeting requires them to give up their pleasures, hobbies, and comforts in order to get started. That is not the case! Ranking expenses allows people to see their financial commitments in order of importance, what they value the most, and also how to avoid unnecessary debt.
Use the Island Approach—The Island Approach is a clever strategy in which a person separates their debt from their everyday expenses. It allows one to isolate their different types of transactions on their bank accounts, credit cards, reward cards, and so forth in order to get a hold of their daily expenses.
Create an Emergency Fund—This can be done by putting a small amount or multiple increments of money to the side either once a month or multiple times a month. Forget that the money exists, and it will help with saving. The report says that it is important to have three to six months’ worth of expenses in reserve in case of a financial crisis or sudden job loss. Even if your budget is extremely tight, it can be done.
Use the “Avalanche” Method for Debt Payoff—Debt should be accounted for in your monthly budget. This method emphasizes the importance of paying off at least the bare minimum of debt while also paying off the balance with the highest interest rate until that balance is gone. Eventually this will allow a person to chop down their debt slowly but surely to become debt-free.
Don’t Neglect Any Part of Your Budget—Bills and other mandatory expenses should always come first with a budget. It is also important to stay on top of saving at the same time in order to achieve financial goals. It helps for a comfortable lifestyle in the present and the future. The report emphasizes that a person who is being extreme with saving while not rewarding themselves can start to affect their mental health. It’s about balance.
Director of Alumni and Career Networks at the University of North Carolina at Chapel Hill, Todd K. Ballenger, said that parents must model good savings behavior for their children in order for their children to adopt the healthy habit.
“Model behavior first—children learn by observation. Share the ‘why’ behind your financial decisions, not just the ‘what.’ Create simple budgets with your children, give them responsibility over small amounts, and let them experience the consequences of overspending in a safe environment.”
He continued, “More importantly, teach them how to think about money—not just how to spend or save it. Introduce core principles like compounding, earning interest versus paying interest, and cash flow in age-appropriate ways. Budgeting isn’t just math; it’s a mindset—one that can be passed from generation to generation with intentionality and practice.” To learn more about the States With the Best and Worst Budgeters in 2025 report and other tips, visit www.wallethub.com/edu/states-with-the-best-worst-budgeters/138069.
