For most of us, creating a budget is the last thing on our minds at the beginning of our money-making days. However, as we get older, we wish it was. Budgets are used not only to track our spending and make sure we don’t spend more than we make, but they are also used to help us create and grow a savings. Whether you want to save for a more reliable car or have enough “just in case,” budgets are the first step to getting there. In this article, we are going to give 5 tips to remember when budgeting.
It can be a tedious task at first, tracking every dollar spent, but eventually you will get to the point where it is second nature. It is normal that you spend a few months budgeting before fully understand it.
- The first tip is to grab your pay stubs, bills, a pen and paper. You will need to jot down your after tax income & list all your expenses. You can also plug in your numbers on an online quick start tool.
- Now that you have all your income and expenses, you will need to keep it rolling. Find a good budgeting tool or program to use to track your income and expenses going forward. You can continue to use paper, a Spreadsheet or some programs can connect to your bank account and automatically categorize your purchases or payments for you. Of course, free is always a favorite. A couple of free online programs are EveryDollar, Buxfer or Learnvest.
- Once you figure out your goal expense categories, an effective way to manage it in your daily living is by using an envelope system. Aside from bills you write checks for, take out cash for the rest. Make an envelope labeled for Food, Clothing, Entertainment, etc. with the budgeted amount of cash available to spend once the envelope is empty for the month, that’s all.
- Regarding your savings plan, one good idea is to have the budgeted amount automatically deposited into savings. Usually you can set up to at least three bank accounts for your paychecks to be deposited into. If you set up the budgeted savings to go into that account automatically, you won’t have to worry about moving it over yourself—one less step.
- Stay focused and on-task with your budget. Sometimes it can be tempting or easy to look at savings as “extra” money. Next thing you know, you see a super cute outfit that is over your budget and think it wouldn’t be that big of a deal. If you can’t pay for it with cash, don’t do it.
Remember, the big objective here is to spend less than you earn. Having money left over after our paycheck is how it is supposed to be; the sooner we can start having that mindset, the better off we will be. Paying for things with cash by saving up for it, is always the smartest financial decision. Good Luck!