We have all heard our share of budgeting tips and most of us realize how important a budget really is. The problem is that creating a budget can be tedious and frustrating and sticking to it can be even more difficult. The truth of the matter is that a budget is a necessity, and the sooner you create your own and learn to stick to it, the more financially happy and secure you will be. Below are five tips to consider when outlining your budget.
Perhaps the best budgeting tip there is, it also the one that is most often forgotten. Simplicity is a key component in every aspect of planning your budget. Many people try to get fancy and go out and buy expensive budgeting software—doesn’t it seem slightly retroactive if your first step in your journey to saving money is spending money? Skip the software; many people end up frustrated with a new program and never finish planning their budget because it is far too complicated. Outline your budget on an Excel spreadsheet or another program that you already have available and are comfortable with. This way you can focus on your actual budget rather than trying to navigate through an overly complicated program.
Keep your planning as simple as possible as well; do not create too many specific categories or you will frustrate yourself trying to decide if movie tickets belong under “media” or “entertainment.” Outline general categories that give you a good idea of where your money is going—having too many categories will also make it more difficult for you to get a clear picture. The simpler your budget, the easier it will be to stick to.
2. Share the Load
Did you know that the number one issue that leads to divorce is financial arguments? Couples who are constantly frustrated over money problems end up taking it out on each other, and the outcome is never pleasant. Instead, sit down together to outline your budget. Each person should take a look at what they are contributing and what they are spending. Make financial decisions together and don’t blame one another—you are a team and share equal responsibility. If you are going to expect each other to stick to a budget, you both have to be clear on what your goals are and you both need to realize that there are areas that you can improve on.
3. Set Realistic Goals
One of the main reasons that people fail to stick to a budget is because they set goals that they could never possibly achieve. You do not have to live up to anyone’s expectations and your budget is yours and yours alone. Only you know what your expenses are and where your money is going, so only you know what you will be able to budget and save.
Set goals that challenge you but that you can realistically meet. Even the smallest goals are worthwhile and accomplishing them will only encourage you to keep going. You will be amazed at the big difference little changes will make, and you can slowly start making bigger adjustments as you become better at budgeting.
4. Focus on Savings
You will never have money saved up if you don’t put it into savings yourself. A savings account is an absolute must and is the only surefire way to make sure that you do not end up in financial trouble. One of the most common mistakes people make is borrowing money when an unexpected expense arises. Now more debt has been created for which more interest will be added, and the end result is less money instead of more. No amount of budgeting tips will help you if you are constantly “borrowing from Peter to pay Paul.” You have to squeeze everything you can out of your income and put as much away as possible for that inevitable rainy day.
By having a completely separate savings account, you are essentially providing yourself with insurance. The money is always there if and when you need it, and you will be prepared should the unexpected take place.
5. Track Your Spending
They say that the best way to lose weight is to write down everything you eat in a day; the same can be said for gaining financial security. By writing down every single dime you spend, you get a clear picture of where your hard earned money is going. You may be surprised at how much money you are wasting on things you don’t really need—money that could be put away in your saving account or paying down your debt.
Did you know that the average American spends almost 6% of their annual income on fast food alone? Imagine where you would be if you had that money in your possession! Knowing exactly where your money is going just might be the best possible budgeting tip there is, and let’s face it; most of us have no clue. You work hard for your money so it is important to realize that all of those “little expenses” add up very quickly. The only way to put a stop to money wasting is to write everything down and then take a nice long look at your financial reality.
Now Get Started!
Your happier, more secured financial future begins now. Break out the pencil and paper (or keyboard and mouse) and start planning your budget today—the sooner you do, the sooner you will see real results. Keep these budgeting tips in mind as you begin outlining your plan and remember that your budget has to work for you. Start small and keep working at it—it’s often the smallest of changes that lead to the biggest rewards.