Creating and adhering to a budget is difficult. When finances are already stretched, it can feel impossible to budget with the money that you have. Yet, the importance of implementing a proper budgeting system in your and your family’s lives cannot be overstated. Understanding where one’s money goes is the basis of making sound financial decisions, improving one’s credit, and saving money with which one can invest in their future.
Having a proper budget is more than just writing out where your money goes. It’s about creating spending categories with “spending limits” and actually sticking to them. This is where many people fall short, become frustrated, and slide back into old spending habits. So, how can you avoid this common financial trap?
The five budgeting tips below are timeless methods of not only creating a budget but also sticking with it so that you’ll see the results in your monthly statements.
#1. Understand Where Your Weaknesses Are
Hey, we’re all human and all humans have flaws. We all have material items and experiences that we’re attached to, and we’ll often find ways of paying for them even when we’re penny-pinching. One of the biggest errors that people make when creating a personal or household budget is not paying due attention to the areas where they’ll be more tempted to spend extra money. Whatever this may be, it is important that anyone with a budget pay extra attention to what their spending “weaknesses” are to stay on track.
#2. When Life Changes, So Should Your Budget
Life changes often and this may result in having more or less money to budget with than when you initially created your plan. When major life or financial changes happen, it’s important to look again at the budget you’ve created and make any necessary adjustments. Changes could include the payments toward a big bill or new loan, a promotion or new job that earns more income, and anywhere in-between. If new life circumstances have impacted how much money a person has at their disposal, it’s time to take a second look at the budget and make changes if necessary.
#3. Don’t Be Too Rigid
Some people like to budget down to the very last penny – and it often doesn’t work. This kind of budgeting is stressful and invites failure because there is no “wiggle room” for sudden, minor expenses. Sticking to a meticulously-planned budget is great practice, but when every single penny is accounted for in the weekly or monthly budget, it’s much easier to fail than it is to succeed. If it’s possible, create an actual “fun” budget amount and an “emergencies” budget amount – just in case!
#4. Try Minimizing Your Use of Cash
Cash can be tough to budget with because it’s hard to keep track of unless you are meticulous about keeping your own records. Most people aren’t, and that’s where debit/credit cards are of great help. Consumers can keep track of their expenditures, bills, and income with any number of online banking apps, many of which are already offered by their banking institution. Making use of an app or website of this nature makes it easier to track your budget because all of the information you need is just a log-in screen away!
#5. Prioritize Your Debts
The best way to save and budget money is to get out from under one’s debts. Make sure to prioritize the pay-down of your debts, starting with the debts that have the highest interest rate (if applicable) and working from there. You can’t get ahead when you’re in debt, so formulate your budget to include some income that will be targeting what you currently owe.
It’s not always easy to create a budget, but for many individuals and families, it is a necessity, a part of improving lives and creating a more comfortable future.