Budgeting is a lot like following a diet. In the beginning, enthusiasm is high, and the intentions are good. After a few weeks, the motivation begins to dwindle, and it gets difficult to follow your plan. Similarly, budgeting can get boring, tedious, and overwhelming with time. But with a few tips and tricks down your sleeves, you can set yourself up for success from day one. Here are 6 budgeting tips that really work. They will make your budgeting easier, enjoyable, and will keep you going when the motivation is low.
The one thing you can do right now to improve your financial position dramatically today and in the future is to know exactly how much you’re spending and how much you’re bringing in.
In This Article
1. Start with the end in mind. Set Goals.
Budgeting without an end goal in mind will eventually fail. You’ll quickly find yourself digging into your savings to buy things that are not in your budget. Saving just for the sake of saving won’t get you anywhere.
To be able to stick to your budget, you’ll need to set some tangible goals. A concrete goal keeps you focused and motivated to stay on course. You are frequently aware that you will not achieve your goal if you overspend or buy unnecessary things.
Before you start budgeting, it’s essential to have a short-term goal and a long-term goal.
An example of a good short-term goal would be: “Pay off my student loan debt of $40,000 within the next two years”.
To make this goal achievable, break it down further into smaller yearly goals. To pay off your debt within two years, you’ll need to pay $20,000 each year. And to make this even more practical and achievable, we’ll break it down further to a monthly payment of $1667.
An example of a long-term goal would be: “I would like to save $2 million for retirement by the time I am 55 years old.”
Setting SMART(Specific, Measurable, Achievable, Realistic, Time-bound) goals will set you up for success with your budgeting.
2. Get a Separate Savings Account.
Having your saved cash in a checking account elicits huge temptations to dip into your savings and spend on unnecessary things. The balance you keep seeing on your checking account gives you an illusion of having a lot of money, yet that’s not the case.
Pulling money out of your savings is basically stealing from your future.
The best strategy to avoid stealing from your own future self is to open a separate savings account. The savings account should not be easily accessible, making it inconvenient for you to draw out money. This small step could be the determining factor of your financial success.
3. Save Money First.
Poor people spend their money and save what’s left. Rich people save their money and spend what’s left
JIM ROHN
Ever heard of the saying ‘pay yourself first’?
It is a personal finance strategy that suggests that your budget should revolve around your savings plan and not the other way around. This means that the first thing to do on every payday is to transfer a certain percentage of your income into your savings account. It ensures that you’ve already saved money for your goals before you spend a dime. By doing this, you are paying your future self.
Whatever remains after setting aside your savings is what goes into your budgeting plan. This remaining amount should cover all your bills and expenses until your next paycheck.
4. Automate Your Savings.
To set yourself up for success with saving and budgeting, it is wise that you automate your savings.
I highly recommend scheduling an automated transfer of cash from your checking account to your savings account every payday.
At times, life comes in the way, and we’re too busy to remember to do such essential tasks. Since your future depends on the actions you perform today, it is crucial to make sure that such actions are performed one way or another. Even better if it’s possible to automate them. Automation makes sure that your savings are in order and that your future is secure way before you start spending.
5. Use Easy Budgeting Tools.
More often than not, budgeting and saving plans fail due to insufficient management resources. The traditional ways of maintaining a budget, such as excel spreadsheets, even though useful, are time-consuming and inefficient. Using an excel sheet would mean recording every single transaction made on your account. A quick check at your budget for the expense limit on your groceries while in the market might be inconvenient, and you might end up overspending just because you couldn’t fire up your spreadsheet fast enough.
There are modern tools and resources created just for budgeting purposes. They easily solve these issues and make budgeting efficient and achievable. Some good examples of such tools are YNAB, Mint, or EveryDollar. The best part is that you can connect any of these apps to your bank account. They track your spending and categorize every purchase into an expense category in your budget, and will let you know if you’re still within budget. These tools make budgeting easy and fun.
6. Budget for Fun Activities.
Contrary to popular belief, budgeting does not have to be restrictive and should not limit your fun. If your budget is too restrictive, you’re more likely to resent it and give it up in a few weeks or days.
A reasonable budget is one that sets aside a portion of your income for fun activities and recreation.
Be sure to allocate a fair amount to spend on things you love. Otherwise, your budget will be doomed to fail. After all, all work without play makes Jack a dull boy.
Summary
If you take away anything from this article, let it be the importance of setting smart goals and the power of paying yourself first.
Budgeting tools and apps will only help you achieve set goals by making the budgeting process easier and enjoyable.
So set goals that will motivate you to stay focused, disciplined, and within your budget.
