Budgeting can be an extremely effective way to help get your finances under control. Having a clear plan and outline of where your money is going is not only important for those that are spending more than they make, but also important for those who are looking at how they can use and allocate their money more effectively! For those who haven't started a budget before, getting it up and going can be a challenge. Here are a few tips that can help you get on the right track!
Prioritize Savings & Non-Discretionary Spending
You should always remember to pay yourself first. Before you can go spend money on non essential items and entertainment, you have to put savings and non-discretionary expenses first. You cannot compromise your financial goals and well-being! You need to put money towards savings. This could be an emergency fund you're working on or possibly a retirement account that you're contributing to. Non-discretionary expenses are things such as rent, a mortgage, food (the basics), and utilities. Consider your savings an expense that MUST be paid every paycheck you receive to help you prioritize it.
Review Your Subscription Based Services
This is a common one that is often overlooked. We live in a time where it's very easy to rationalize spending $8.99 per month on some sort of service. With our financial behavior, we're more apt to make 12 small payments spread out over a 12 month period versus taking the sting of one large payment all at once. These subscription based services can add up relatively quickly if they go unchecked. This could be a spot in your budget where you could free up a substantial amount of cash flow. You also want to make sure that your budget doesn't just have a category for credit card payments. Break down that payment so you have a better understanding of what's on your bill!
Leave Room for Fun
If you can, set aside a little money for some fun! Budgets that are too restrictive often don't work. You need to make sure you're still having some fun. Put money in a eating out section or a drinks with friends section. Whatever allows you to relax a little so that you don't feel so restricted.
What If I don't Have A Budget?
If you're having cash flow issues or problems prioritizing your spending, you should probably look into starting a budget. If there's a hole in a boat, you can't patch the hole until you know where it is! The same thing can be said about your finances. You must know where you're spending your money if you want to effectively manage your finances.