It seems like some people were born with awesome financial mastery while others have not been so fortunate. Budgeting, saving, cash-flow management, and other financial undertakings can be cumbersome, to say the least.
But, if you haven’t already, it’s time to face the music and do a deep dive into your financial situation and actually learn how to budget better. This can prove to be the first step toward finally feeling like you are in control of your money rather than the other way around.
Plus, taking the time to manage your money better can really pay off (no pun intended) as well as help you understand how to budget better.
It can help you stay on top of your bills as well as save you money each year. And, with the extra money you save, you can do a great deal of things.
Pesky mortgage payments? Add more to the repayment plan to chip away at it. Retirement plans? Allocate some more funds to it. Ready to take a trip? Go ahead dust off the old Hawaiian shirts and vacuum the spider webs out of your suitcase.
In order to get there, however, you need to budget and budget well. No one said it was going to be easy, but with a little organization, perseverance, and a positive mental attitude, it can be achieved.
Here are 9 fundamental tips to consider to help steer you in the right direction.
1. Create a savings goal and budget
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The first step to taking control of your finances is actually creating a budget based on the savings goal you want to achieve. Without it would be like driving in the dark without headlights.
Yet, some people have a tendency to create budgets that are way more complicated than they really need to be. As such, managing them becomes cumbersome and a royal pain in the you-know-where to have to have to stay on top of. This also explains why many cringe at the idea of having to create a budget in the first place. And so avoidance becomes the norm.
But, it doesn’t have to be this way. It really doesn’t.
Keep your budget and your savings goal simple. No need to create complex and confusing spreadsheets with pivot tables and formulas. No finance or accounting degree needed here; basic math should suffice. Start with the one thing that you most want to accomplish when you reach your savings goal.
Do you want to pay off a student loan? Pay off credit card debt? Save some spare cash to renovate your house? Allocate more funds into your IRA? Set aside for an emergency fund? Determining your main objective will help you stay focused and on the right path.
2. Know your problem
As painful as it may be, you have to admit to yourself you actually have a financial problem. Next step is to take action to solve it. If your problem is that you aren’t meeting your monthly budgeting goals, then overspending could be your issue.
Or, if your issue is more a lack of income or not fully realizing your earning potential, look for fixes such as finding a side hustle or other opportunities to leverage your skills and make some extra cash to help alleviate the problem. In this gig economy we live in, there are several options out there that exist.
3. Track spending for a month
Try this: track all your income and expenses for one month.
This is a healthy exercise and a good precursor to creating your savings goal and setting up your budgeting plan with a greater insight. Plus, it’s an excellent way to get a full picture of the money you have coming in and going out, and you will need this fundamental understanding going forward.
It can be tempting to stop keeping up with every little expense, but as enticing as that sounds, keeping track will aid you in sticking to your budget and understanding how you are progressing. In addition, doing this can really help restrain your desire to overly spend and will ensure you know how much you actually have. This should, in turn, motivate you to pay off debt (if you have any) and save more rather than letting your lifestyle decisions and spend sneak up on you.
So, save your receipts, bills, invoices, and other financial transactions and keep these well-organized and jotted down and come back to them frequently to see where you are financially. It’s important to choose your weapon of choice for tackling this exercise. Make sure to choose one that is free, isn’t highly complex and has all the features you need to get the job the done. There are several options out there that exist from the old school instrument of pen and pad, spreadsheets, and many many websites and personal finance apps that have great processing power, are user-friendly and are very easy to use.
Here are some tips to consider when crafting your budget:
- Make sure it is as thorough as possible.
- Create categories (such as housing, transportation, utilities, food, vacations, gifts, insurance payments and debt payments) and add these expenses and transactions into the appropriate category to get them organized correctly.
- Stay on top of each item tagging and categorizing each item and reviewing your spending daily (perhaps review everything before going to bed so you can sleep easily throughout the night).
- Know when to revisit your budget. This could be daily, weekly, or monthly. It’s up to you, but the important thing is to stay on top of it. As you revisit your budget, feel free to edit or tweak it as needed. It’s quite normal for your expenses and incomes to change monthly or yearly, so as it does, adjust your budget accordingly with these variations.
4. Charge it
Pay with plastic. Rock beats scissors and plastic beats cash. Or something like that. What I mean here is that it’s a lot easier to track your expenses when they are tracked for you, for example in your monthly bank statement which provides an automatic record of all your purchases and lists all your credit card transactions. This might prove highly useful as well as the best way to manage your money.
Try this for an entire month: use your credit card for most purchases (going out for dinner, buying groceries, buying a new pair of shoes, paying for the movies, etc.).
Word of caution: if you have a lot of credit card debt, are currently only able to pay the minimum balance due each month, and have a high-interest rate, then this might not be the best idea.
If you prefer to use cash, then to help you keep tabs of your spending and expenses try using a personal finance app such as MoneyStrands that allows you to add cash accounts, as well as bank, savings, IRA, and other financial accounts.
5. Get your family involved
If you are a mom that manages the shopping for household products, groceries, and other items, get help and commitment from family members when it comes to creating your budget. Sit down together, review the current financial situation, and make a plan that you can all be involved in.
There is strength in numbers, so make sure that every family member’s income and expenses are accounted for — yes, even your 12-year-old’s weekly allowance. Assure that everyone’s spending habits and amounts are made transparent so that the budgeting strategy can be solidly crafted.
6. Lower your household expenses
After you and your family members are on the same page in terms of the budgeting strategy you want to follow, it’s time to make some decisions on how to manage your finances. Some of these choices might demand that certain sacrifices be made or that you have to do some penny pinching here and there, but what’s important is that the budget that is set is agreed upon and everyone knows their role in helping to meet it.
If your aim is to bring down household bills and daily expenses, several ideas can come to mind. For example: reducing your home phone and broadband bill by switching to a less expensive plan or package with your current provider or by changing to other companies that offer a similar yet cheaper service.
If you are driving an hour to work every day, perhaps public transportation will be just as fast at only a fraction of the cost. If you use air conditioning in the summertime to cool your home or apartment, perhaps open windows or doors to let a draft in. This will consequently help cut down on your energy bill.
As for lowering your food costs, considering the following: instead of buying brand name foods switch to store brands or private-label goods. And, rather than buying all your food and household products at the small grocer down the street, consider shopping at bigger wholesale warehouses and buy in bulk to help you stretch your dollars.
The key here is to sit down and determine what you can do to reduce your household expenses easily and without deteriorating your lifestyle.
7. Be realistic and don’t overdo it
As crazy as it seems, some people take drastic actions in the attempt of reaching their goal. Ideas like only eating ketchup sandwiches and drinking tap water for an entire month to save on food costs isn’t good for anyone.
You’ve probably heard the saying “everything in moderation” in the past, right? Extreme sacrifices are unhealthy and not worth it. Set a goal that is realistic and attainable in the short-term — such as reducing your grocery bill by 10% every month — and won’t force you to have to have to starve yourself or contribute to worsening your wellbeing.
8. Stick to the budget
Budgeting. The lovely dreaded word. You are either a fan of it or not. Or more often than not, it’s a love/hate relationship that is relatable to dieting, exercising, and watching Netflix (sure you love Breaking Bad but feel underproductive and possibly guilty after binge-watching it an entire Sunday afternoon).
Sure, we love the idea of being better at controlling or money but hate the fact that this will force us to be stricter with our spending habits and, as such, more restrained in our sporadic and impulsive purchasing behaviors. But budgeting is a necessity and one that needs to be done right over time.
Getting your finances in order isn’t something you can do from one day to the next. Much like a long-term diet, budgeting takes effort and determination to make it work. And much like sticking to a diet, we know it isn’t easy but it most certainly is possible and achievable.
It’s really all about keeping a focused eye on the big picture and paying attention to the details along the way.
If you stick to a budget for the long run, you will be in a much better financial position as well as have the knowledge and understanding to make smarter financial decisions.
9. Stay positive
Last but not least, keep a positive mindset. Budgeting, saving, and managing your finances can have a psychological impact on your well-being; acknowledge that and try not to let your financial situation tear you down, make you depressed, or affect your relationships with your friends, family or colleagues. Many people have had and are facing similar challenges with their own finances. Never forget that. You are not alone.
According to a survey released by the American Psychological Association: parents, younger generations and those living in lower-income households report higher levels of stress than Americans overall, especially when it comes to stress about money.
APA CEO and Executive Vice President Norman B. Anderson, PhD, said:
“Regardless of the economic climate, money and finances have remained the top stressor,” and that “stress related to financial issues could have a significant impact on Americans’ health and well-being.”
So, it’s important to try not to let the stress get to you and affect you in a negative way. With a strong attitude, a little perseverance, organization and dedication, your budget will work for you and will help you reach the financial goal you have set for yourself. But this will not happen unless you keep your head up, stay determined and most importantly stay optimistic.
A final note
To recap, here is the list of the 9 Tips To Help You Budget Better:
- Create a savings goal and budget
- Know your problem
- Track spending for a month
- Charge it
- Get your family involved
- Lower your household expenses
- Be realistic and don’t overdo it
- Stick to the budget
- Stay positive