While budgeting may seem like commonplace financial behavior, the fact is that only one in three Americans create a formal budget and stick to it! What most beginners can attest to is that creating the budget isn’t the issue, it’s knowing how to stick to a budget in the months that follow.
You can read every financial blog, but if you don’t change your financial habits and follow simple budget tricks, your budget won’t be as successful as you might like. With the right tips and resources, budgeting can not only be possible, but easier than you initially thought!
Create Your Spending Plan
When you’ve gone ahead and created your personalized budget, the most important step is to create a spending plan that reflects your budget and the financial goals you have set. With your budget in hand, take a look at your spending habits from the previous month. This can be easier if you have your bank and credit card statements handy, as you’ll be able to see accurate records of the transactions.
While doing this, separate your expenses into two different categories:
- Fixed Expenses
- Variable Expenses
Your fixed expenses will not change throughout the month. These are usually necessary expenditures such as mortgage payments, rent, car title loans, student loans, and other monthly payments. Your variable expenses do change throughout the month, such as the money you spend on entertainment, transportation, and groceries. Generally, your fixed expenses are the priority throughout the month.
When you are separating your expenses into these categories, this can be where you create your spending plan. Use your estimated income to delegate your money throughout the month. By separating your expenses, you get a clear image of where your money is going every month. If you are overspending in one category, this is where you can adjust your spending plan as needed.
Keep Your Financial Goals in Mind
Everyone creates a budget for different reasons, as no one will have the same set of finances or financial circumstances. Whether your financial goals include saving for a house or getting out of debt, a budget can ensure you become closer to meeting your financial goals. When you find yourself creating your budget, think of what kind of financial goals you want to have.
You should create a few different goals:
- A Monthly Goal
- A Yearly Goal
- A 5 Year Goal
- A 20 Year Goal
Stick to Your Budget
With your spending plan and budget in hand, make sure you are sticking to your new financial habits by updating the budget when the need arises. One of the easiest ways to stick to your budget is by physically carrying it with you!
Whether you prefer a physical ledger or an app on your phone, keeping your budget with you can help you to remember to record all your purchases. Being able to look at your budget can also keep you accountable when it comes to buying things you may not need.