If you’re like me, you regularly wonder where your paycheck has disappeared to. You try to save, but without the right roadmap, those savings efforts seem futile.
And let’s face it, you don’t want to be restricted or spend hours on your finances. But you also don’t want to shimmy from paycheck to paycheck. So unless you’ve a money tree in your backyard, you need to develop a strategy for how you spend your hard-earned money. According to a Credit.com survey, about 60% of Americans don’t have a monthly budget, and many of them admitted that the simple reason they don’t have one is because they don’t know how to create one.
If you’re one of those people, or just curious about how to budget better, here are some practical budgeting tips from experts to help you achieve optimal financial health:
1. Set your goals
When you’ve a goal in mind, it’s easier to stick to your budget. Before you create a plan for your finances, think about why you want to do it. If you’ve a partner, you can discuss your future goals and plan your budget accordingly.
2. Set your savings goals
When saving and budgeting, it’s important to keep the momentum going. One effective way to do this is to set your short- and long-term goals. Maybe you’re saving to buy your dream car, get out of debt, or start a business.
Once you’ve set your goals, break them down into SMART – specific, measurable, achievable, relevant and time-bound. This way you can stay motivated.
3. Create a budget plan before the month starts
When it comes to budgeting, planning is key. Before a new month begins, sit down and set your budget. List your plans and expenses. You can use pen and paper to do this. If you’re a techie, you can download a budget app.
Maybe you’ve a dentist appointment coming up or need to take your pet to the vet. Once you’ve the upcoming month planned out, create a budget. You can divide your income and categorize your expenses accordingly.
4. Use the right tools
A method that works for you may not work for others. So, if you don’t like writing things down with a notebook and pen, budgeting apps are the way to go. You can use a tracker to see where your money is going.
Some budgeting apps help you see where your money is going, remind you of your goals and monthly bills, and notify you when you’re overspending.
5. Do it YOUR way
When it comes to budgeting, there’s no magic formula. Ultimately, the best plan is the one that works for you.
“The key to success is to stick with it and realize that the first few months are really hard,” says Liz Gillette, a certified financial planner with Mainstreet Financial Planning Inc.
The popular 50/30/20 method is popular because of its simplicity. With 50% of income going to necessities, 30% to wants and 20% to savings, it’s a structured way to determine where your money should go.
You can find more savings methods from NerdWallet here.
6. Organize receipts and bills
Keeping your receipts and bills will make it easier to budget. It also gives you an overview of how much you spend on a certain category. Plus, you can easily appeal in case of errors.
If you receive your bills in the mail, you can sort them by envelopes or folders. If you receive everything by email, sort everything electronically.
7. Note that every month is different
When budgeting, remember that every month is different. Sometimes you need to set aside something for car maintenance, school supplies, vacations, vacations and birthdays.
Always keep special occasions in mind when planning your budget. You can set aside a separate savings fund throughout the year so you’re prepared for any eventuality.
8. Pay off your debts
If you owe money to friends or relatives, you should pay it off as soon as possible. You can use different strategies to reduce debt, such as the Snowball Method and Dave Ramsey’s 7 Baby Steps.
Choose the method that works best for you. Pay off your debt as aggressively as possible to free yourself from the financial burden.
9. Leave room for surprises
Even if you’ve planned your budget, that doesn’t mean everything will go as it should. You might find yourself making impulse purchases. That’s why it’s important to leave room for surprises.
Set aside something for miscellaneous expenses and put something in your emergency fund. This will help you avoid having to take out loans to pay for emergencies.
10. Save first, then spend
Some people make the mistake of spending first and saving only what’s left over. This leads to inconsistent savings. Think of saving as a fixed expense and plan for a certain amount each time you budget. Spend only what’s left over after you’ve put in your savings contribution for the month.
11. Use cash for categories where you often overspend
If you often overspend on your “wants” or groceries, the envelope system can help you control your impulses. Decide on cash and sort it into envelopes. Once you run out of cash for that category, stop spending it.
12. Give yourself some time
If this is your first time budgeting, you may not follow through with everything. And that’s okay, too. It usually takes a few months for you to master the art of budgeting.
13. Plan for big purchases
If you’re planning to spend on expensive items like a laptop or a TV, make sure you allow enough time and money. Set a purchase date and divide the days and amount of the item.
Let’s say the item you want costs $800 and you’ve 250 days; then you only need to save $3.20 per day. This method will save you from using a credit card and paying high interest rates.
14. Use separate bank accounts
Some people find it easier to budget if they’ve separate bank accounts. You can set up one account for your savings, your fixed expenses, and your other expenses. This way, you can keep track of whether you’ve any money left over and whether you’ve already paid your bills.
15. Try to take a spending-free day
One way to save money is to designate one day a week when you don’t spend money on various things. A spending-free day helps curb your appetite for extras and gives you time to think about your spending habits.
If you’re trying to curb your impulsive spending habits, try doing this for a month and spending only on basic necessities.
16. Stop comparing and be satisfied
When it comes to your financial journey, it’s best to be content. Comparing your situation to others will do you more harm than good. Not only will it affect your emotions, but it’ll also affect your financial health: move forward and focus on your financial goals for yourself and your family.
17. Start your journey to financial freedom
Your journey to financial freedom starts with the simple step of creating a budget. Even if you can’t stick to it for a few months, you’ll gradually get used to your budgeting routine.
Start planning your budget, stick to it, and maximize your financial health today!
