Everyone knows they should have a budget they stick to. It’s essential for healthy personal finances. The problem is that most of us just aren’t very good at creating one we’ll actually keep to for more than a week or so. Fortunately, this article will take care of that problem once and for all.
Start with the Goal in Mind
One of the main problems with trying to set a budget is that most people have the same not-so-great goal: creating a budget. That’s too vague. Another common problem is that the goal of the budget becomes penny-pinching and tracking each and every dime that gets spent. This, too, is not the goal.
The goal of a budget is simple: to ensure you spend less than you make and to make sure that your spending happens in a controlled, intentional and healthy way. Whatever your budget might be or entail, make sure it’s heading toward this target.
Track Your Expenditures for a Week
Another reason most budgets fail is because they’re unrealistic. Put another way, people make them without really understanding how they spend. You may think you only spend about $70 a week outside of monthly bills, but once you actually track your expenditures for a week, be prepared for a shock. There are probably all kinds of little extra purchases you don’t consciously think about.
Ideally, track your spending for an entire month to see what you’re working with in terms of budgeting.
Choose Where You Can Cut Costs
Once you know where your spending is happening, try to find three areas where you can begin saving money. For most people these categories are:
- Buying clothes
Yours may be different, though. Just look where you spend money on things that aren’t absolutely essential. No one’s saying you can’t have a social life or update your wardrobe, but look for opportunities to simply bring your monthly overhead down.
Get a Rewards Card
Yes, we’re actually recommending you obtain a credit card in order to help with your budget. This is for two reasons:
- A credit card makes it easy to track spending (and reverse fraudulent charges)
- Rewards cards will automatically help you save, too, by giving you great deals
Pick a rewards card that will actually help you save. If you don’t fly much, then earning miles doesn’t matter much. If you tend to shop at the same stores for essentials, look into getting rewards cards they offer.
The big cardinal sin of saving is waiting until the month is over to finally put anything extra into our savings. Instead, add to your savings at the beginning of the month and then watch how your spending habits change to fall in line with your new budget.
Finally, have some fun with this. Reward yourself for your budgeting efforts and allow yourself a sense of accomplishment as you watch your savings grow and your debt diminish. Budgeting isn’t a punishment, but an important way of taking control over our lives.