If you’re anything like me, you wonder where your paycheck ran off to on a regular basis. You try to save but without the right roadmap, those saving efforts seem futile.
And let’s face it — you don’t want to feel restricted or spend hours on hours dealing with your finances. But you also don’t want to be struggling paycheck-to-paycheck.
So unless you’ve got a money tree in your backyard, you need a strategize how you spend your hard-earned money.
About 60% of Americans don’t have a monthly budget, according to a Credit.com survey, and many of those people admitted that they don’t have one simply because they don’t know how to create one.
If you are one of those people or are simply curious how to budget better, here are some practical budgeting tips from the experts to help you achieve optimal financial health:
1. Set your goals.
When you have a goal in mind, it is easier to follow through with your budget. Before creating a plan for your finances, determine why you want to do it. If you have a partner, you can talk and discuss your future goals and plan your budget around them.
2. Outline your savings benchmarks.
Maintaining momentum when it comes to saving money and budgeting is essential. And one effective way to do that is by outlining your short- and long-term goals. Maybe you’re saving to buy your dream car, free yourself from debt, or start a business.
Once you’ve determined your goals, break it down into SMART goals—specific, measurable, attainable, relevant, and time-bound. Doing so will help you stay motivated.
3. Come up with a budget plan before the month starts.
When it comes to budgeting, planning is essential. Before a new month begins, sit down and allocate your budget. List down your plans and expenses. You can use a pen and paper to do it. If you’re a techie, you can download a budgeting app.
You may have a dental appointment coming up or bring your pet to the vet. Once you’ve planned for the upcoming month, set up a budget. You can split your income and categorize your expenses accordingly.
4. Utilize the right tools.
A method that works for you may not work for others. So, if you don’t like writing down using a notebook and a pen, then budgeting apps are the way to go. You can use a tracker to see where your money goes.
Some budgeting apps help you visualize where your money is going, remind you of your goals and monthly bills, and notify you if you’re overspending.
5. Do it YOUR way.
When budgeting, there is no one-size fits all. Ultimately, the best plan is the one that works for you.
“The key to the game is just sticking with it and recognizing those first months are really tough,” says Liz Gillette, a certified financial planner with Mainstreet Financial Planning Inc.
The popular 50/30/20 method is popular due to it’s simplicity. With 50% of income going to necessities, 30% going to wants, and 20% going to savings, it’s a structured way to outline where your money should go.
Check out more savings methods from NerdWallet here.
6. Organize receipts and bills.
Keeping your receipt and bills makes it easier to plan a budget. It also gives you an idea of how much you spend on a specific category. Aside from that, you can easily file a dispute if there are any errors.
If you receive your bills via mail, you can organize everything by envelope or folder. If you get everything via email, sort everything electronically.
7. Take note that every month is different.
When it comes to budgeting, remember that every month varies. Sometimes you’ll have to set aside something for car maintenance, school supplies, vacations, holidays, and birthdays.
Always keep special occasions in mind when planning your budget. You can have a separate savings fund throughout the year so you’re ready for anything.
8. Pay off the money you owe.
If you owe money to friends or family, paying it as soon as possible should be your priority. You can utilize different debt reduction strategies like the debt snowball method and Dave Ramsey’s 7 Baby Steps.
Follow 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 though you’ve planned for your budget, it doesn’t mean everything will go as is. There might be impulsive buys along the way. That’s why it’s important to leave room for surprises.
Set aside something for miscellaneous expenses and put something in your emergency fund. Doing so will prevent you from taking out loans to pay for emergencies.
10. Save first before spending.
Some people make the mistake of spending first and only saving what’s left. Doing this results in inconsistent savings. Look at savings as a fixed expense and allot a specific amount every time you plan your budget. Only spend what’s left after putting in your savings contribution for the month.
11. Use cash for categories you often overspend in.
If you often overspend on your “wants” or grocery, the envelope system might help you control your impulses. Opt for cash and sort them in envelopes. Once the cash for that category runs out, stop spending.
12. Give yourself some time.
If it’s your first time setting up a budget, you might not be able to follow through with everything. And that’s okay. It usually takes a few months to master the art of budgeting.
13. Plan for large purchases.
When planning to spend on expensive items like a laptop or television, allot enough time and money. Set a date of purchase and divide the days and item amount.
Let’s say the item you want costs $800, and you have 250 days; you only need to save $3.20 per day. Doing this method saves you from using a credit card and paying for high-interest rates.
14. Use separate bank accounts.
Some people find it easier to budget when they have separate bank accounts. You can have an account for your savings, fixed expenses, and miscellaneous expenses. That way, you can track if you still have some money to spare and if you’ve already paid your bills.
15. Try to do a no-spend day.
One way to save money is by designating one day per week where you don’t spend any money on miscellaneous things. A no-spend day will help curb the appetite for extras and allow time to reflect on your spending habits.
If you’re trying to cut back on your impulsive spending habits, try to do this for a month and spend only on your basic needs.
16. Stop comparing and be content.
When it comes to your financial journey, it is best to be content. Comparing your situation to others might do you more harm than good. Not only will it affect you emotionally but also affect your financial health.Move forward and focus on your financial goals for you and your family.
Begin Your Journey to Financial Freedom
Your journey to financial freedom begins with the simple step of setting a budget. Although you might not be able to keep with it for a few months, you’ll slowly adjust into your budget routine.
Start planning your budget, stick to it, and maximize your financial health today!