Three easy tips to establishing a budget
Financial health is one of the most popular goals people tackle in January, but by February and March, many new financial plans have lost their momentum and many people fall back into a money rut.
Budgeting can be a great tool to managing your income and planning ahead, but when it comes to sitting down and drawing one up, step-by-step, it’s easy to make simple mistakes that throw you off. So when you sit down to draw out your plan, follow a few simple steps to make sure you have all the bases covered.
1. Total up all your monthly expenses
One of most common problems people run into when calculating their monthly expenditures is forgetting about the little things. Hair appointments, gym memberships and morning coffee costs can add up and throw your figures off, so it’s important to make sure these are included in your budget. It’s also important to add in seasonal costs, such as holidays, birthdays and even registering your vehicle when the time comes. Your budget may change on a month-to-month basis, depending on what you have going on in your life, so making a comprehensive list of your expected expenses will help you plan accordingly.
2. Make room for your financial goals
It’s easy to look at a budget as a restrictive set of rules, but creating a money management plan is actually a liberating action that allows you to work toward your future goals. You should always include a goal section in your budget for accomplishing your financial aims, whether it is paying off your credit card, planning a vacation or saving for a down payment on a new car or home. By including a percentage of your income in your budget, you can track your savings, avoid the temptation to spend extra money sitting in your account and stay motivated to continue saving.
3. Look for weak spots in your spending
Another great part about budgeting is that it sobers us up to weak points in our spending. For example, by detailing your income, bills and discretionary spending, you may find that you’re paying too much for your cable package or not devoting enough resources to your retirement account. Examine your budget for costs or expenses that may be holding you back from reaching your goals. You may find that by cutting out magazine subscriptions, coffee runs and switching to a more affordable cellphone plan, you can devote more money to your long-term goals and reach them more quickly.