Budgeting has gotten a bad rap. It’s not about reusing paper towels and stockpiling money under the mattress, and it’s definitely not about skipping fun. Budgeting is about telling your money where to go so you won’t wonder where it all went. But how do you do build a budget? And how do you stick to a budget? Here are a few ideas:
Tips for Building (and Sticking to) a Budget:
1. Get Your Documents In Order
Paystubs, credit card bills, utility statements, emails, bank statements – anything and everything you have that has anything to do with your money. Get it together and compile a list or even a spreadsheet for quick reference.
2. Tally Up All Income For The Month
Look at your paystubs and the profit from any jobs you do on the side. If you work a job with varying salary, like bartending or seasonal labor, it’s best to gather a few months of wages and average them out. For example, if you earned $500 in January, $1,000 in February, and $1,500 in March, your average salary would be $1,000 per month.
3. Add Up Your Expenses
Make a list of everything (everything!) you have spent money on in the past few months. Look over your bank and credit card statements and don’t leave anything out. Sure, Netflix doesn’t cost much, but it counts. And so do those lunches out during the week. Write down all of it and add it up.
4. Do the Math
Subtract your expenses from your income. Anything left over? Great! Make that money work for you by paying down debt or saving it toward a goal. Spending too much? Not great! But totally fixable.
5. Make Adjustments
Some expenses are fixed, like your rent or your car payment. Other adjustments are variable, like grabbing take-out or going to the movies. If you end up with too much month left at the end of the money, you need to make a change to your variable expenses.
6. Plan for the Unexpected
Life happens! Cars break down and unplanned expenses pop up. If you’re able to, put a little money aside each month is an emergency savings account. It will grow over time, and you’ll slowly but surely be more prepared to deal with what life throws at you.
7. Test it Out
If you’ve eliminated every fun thing in your life and you still can’t make ends meet on paper, you might need a little boost. Look at what’s holding you back: Is it your credit card debt? A car note? The solution may be a small loan that you use to pay down all this debt and then pay back over time. By incorporating one smaller, predictable payment into your budget it will be easier to make it all work.
8. Earn More
Sometimes it isn’t as much about spending less as it is simply earning more. If you need an extra $100 each month to make your rent, there are numerous ways to make that happen. If you have a spending plan for each month, you can determine where you may fall short and be able to take action.
9. Create Goals
Once you’ve worked out the kinks and settled into a spending plan that frees up some cash, you need to have a plan. All that extra money is great – but don’t waste it! Create a plan for your money and start saving it. Paying down credit card debt and student loans are great goals, so is planning a vacation or saving for a down payment on a home.
10. Review Your Progress And Stick With It
Life happens! Not everything is going to go according to plan, and that’s ok. By keeping an eye on your spending and socking some cash away for a rainy day, you’re going to be prepared. Not every month is going to be perfect and your spending may reflect that. Just keep on keeping track and adjust as needed. If you get a surprise repair bill, you know that you can shift a little cash from your ‘going out’ money to cover it.
Over time, the boundaries of your budget will be second nature and you won’t need to review the numbers as much. By slowly shifting your behavior to take power over your finances, you’ll be more in control. And from control comes success. If you need help developing a budget, it's always a good idea to contact a qualified lender with questions, such as how to use small loans in South Carolina or Georgia.
Learning to manage a budget becomes a fairly simple task with a bit of practice. Take a look at The Basics of Budgeting to get started.