Budgeting Tips and Resources
The most critical factor in managing your debt is knowing how to accurately budget. But, before you can establish a personal budget, you must first take a look at how you’re spending your money, both in the short term and the longer term.
Tracking Your Spending
To get an accurate financial snapshot, make a list of all your expenses and divide them into the following categories:
Fixed Expenses
Fixed expenses are recurring bills that remain constant every month. Fixed expenses include:
- Mortgage or rent payments
- Loan payments
- Insurance premiums
- Car payments
Flexible Expenses
Flexible expenses can change each month. Flexible expenses include:
- Groceries
- Utilities
- Credit card bills
- Household supplies
- School supplies
- Clothing
Discretionary Expenses
Discretionary expenses may be unnecessary expenditures that are just part of your lifestyle. These include all the miscellaneous expenses you have such as:
- Dining at restaurants
- Coffee shops
- Entertainment
- Magazines & Newspapers
- Hobbies
- Organization memberships
If you don’t know what and how much you’re spending each month, make an effort over the next 30 days to keep a log of everything you buy. This will help you establish a baseline for your budget. Leave nothing out; even the smallest daily expenses can quickly add up.
Household Budgeting Tips
While budgeting is essential, it’s not always easy. Keeping tabs on every purchase can be difficult, which is why we created a few tips to help get you started.
Evaluate the Difference Between Needs and Wants
Most consumers overspend because they buy things on impulse. The next time you’re tempted to make an impulse buy, ask yourself the following questions:
- “What do I need this for?”
- “Can I afford to buy this item?”
- “Do I need my money for something else?”
- “Will this item go on sale?” “Should I wait to buy?”
- “Does it matter if I buy brand-name or can I get by with generic?”
If you take a moment to think about what you are buying, you’ll find it easier to curb unnecessary spending and save those funds for what’s important.
Save First, Spend Later
You should always pay yourself before spending money on anything. That means putting part of your household budget into savings. Here are three easy steps to increase your savings so you can set yourself up for future financial stability.
- Set aside about 5% to 10% of every paycheck for your savings account. Make that money your “rainy day fund” for handling any financial emergencies that could come up in the future.
- Deposit any extra income you have into a savings account OR use it to pay off debt rather than go on a shopping spree.
- Empty your change into a jar each night. When enough is accumulated, deposit that into your savings account.
Can I Afford it, Really?
The secret to personal budgeting is always to ask yourself one simple question: “Can I afford it?” Not just “Can I afford it today?” but “Can I afford it this month?” After all, that cup of coffee may not seem like a big expense today, but a month of coffee becomes expensive.
- Take a moment to think about how each purchase will impact your finances for the remainder of the month.
Don’t be upset if things don’t fall into place within the first couple of months of personal budgeting. There’s going to be trial and error. The important thing is to keep trying and not give up. For more details on strategies for better budgeting call us today at 800-500-6489!