As the cost of living continues to rise, effective budgeting has become more important than ever. To shed light on where Americans are managing their finances well and where there's room for growth, WalletHub has released its report on the States With the Best and Worst Budgeters in 2025.
In the study, WalletHub evaluated all 50 states across 12 key indicators of budgeting habits, including average credit scores, debt-to-income ratios and foreclosure rates.
| States With Best Budgeters | States With Worst Budgeters | |||
| 1. Hawaii | 41. Texas | |||
| 2. Washington | 42. South Carolina | |||
| 3. Massachusetts | 43. Tennessee | |||
| 4. Wisconsin | 44. Nevada | |||
| 5. Minnesota | 45. Arkansas | |||
| 6. Vermont | 46. Georgia | |||
| 7. North Dakota | 47. Alabama | |||
| 8. New Hampshire | 48. Oklahoma | |||
| 9. Rhode Island | 49. Louisiana | |||
| 10. Colorado | 50. Mississippi | |||
To view the full report and your state’s rank, please visit:
https://wallethub.com/edu/
“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.”
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“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%. 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%, which helps reduce or eliminate interest while improving people’s credit scores.”
- Chip Lupo, WalletHub Analyst
Expert Commentary
What are the most effective ways to budget and manage personal finances?
“The most effective budgeting begins with clarity – knowing exactly how much you earn, spend, and owe. Use a structured system: track expenses, categorize them, and prioritize saving. The goal isn’t just to limit spending but to align it with your financial priorities now and in the future. Don’t budget like it’s a diet. The key is not deprivation. The key is awareness. Spend money only on things that bring some form of fulfillment. You must also think in terms of managing your liabilities, especially large ones like your mortgage, as borrowing from your future self to buy something today you really want. If you really pay attention, you’ll find things you are spending money on that really don’t make you happier – cut those from your spending.”
Todd K. Ballenger – Director, Alumni and Career Networks, University of North Carolina at Chapel Hill
“The best way to create a budget is to first identify your financial values and goals, then track your expenses to build awareness of your spending habits, frequently reflect on how your habits compare to your values, and then make adjustments. There's no right or wrong way to budget, and the most effective way is the way you can stick to consistently.”
Liam Neu – Peer Wellness Ambassador, Financial Wellness Center - The University of Utah
What is the most common mistake people make when it comes to managing their budgets?
“One problem is underestimating expenses, especially those that occur at irregular intervals like car repairs. You need to budget a portion of those costs as if they are happening every month so you will have the money available in savings when the expense comes around, but it is still hard to predict and convenient timing is never guaranteed. It might simply be impossible to plan for large surprises other than to have an emergency fund, but if you know you’re going to get an oil change every six months, then budget for ‘a sixth of an oil change’ each month, so you’ll be able to afford it.”
Daniel Villanova, Ph.D. – Associate Professor; Doctoral Program Director, Department of Marketing, University of Arkansas
“They don’t pay themselves first. Too often, saving is the last line item on the spending plan, or it is not on the spending plan at all. By putting savings as the first expense, right under income, individuals are more likely to have an emergency fund and savings/investments for short and long-term goals. If you are in a position where you can’t save much, save at least a few dollars, anything to get in the habit.”
Jacob Tenney, Ph.D., CFP® – Associate Professor; Director of Financial Planning and Financial Literacy, University of Charleston
What is the best way for parents to teach their children how to budget?
“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. 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 mindset – one that can be passed from generation to generation with intentionality and practice.”
Todd K. Ballenger – Director, Alumni and Career Networks, University of North Carolina at Chapel Hill
“Modeling and practice. Kids learn by watching their parents, so if you budget in front of them and exhibit care around spending, they can start to internalize that. Involve them in decision-making for small items at the grocery store or have them help plan a family activity with a budget. If you provide an allowance or pay for house chores, have them earmark a portion of it for certain things, like money for spending, savings, and potentially charity. Kids can also learn to budget if they have big-ticket goals that necessitate saving over time, which will get them to track their spending and saving.”
Daniel Villanova, Ph.D. – Associate Professor; Doctoral Program Director, Department of Marketing, University of Arkansas
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