Ahh, budgeting. It’s not necessarily the sexiest or most exciting word in the English language, but it is one of the most important. Tracking your monthly expenditures and making sure that you don’t spend more money than you make is crucial to maintaining good financial health, but finances can also be confusing. Sure, you might wish you could be better about money, but if you’re anything like me, then Excel is your arch-nemesis.
There are few things in life that fill me with more dread than having to create a spreadsheet, and it’s certainly never something I’d choose to do in my free time! So what’s an Excel-hating gal to do when she needs to start getting serious about her finances? Here are a few practical and realistic budgeting tips to help guide you through these stressful economic times:
1. First, Just Get a General Idea of Your Monthly Expenditures
Talking and thinking about money can get very overwhelming very fast, so take things slow to start. Begin by simply taking a look at your monthly expenditures so that you can get an idea of how much money you’re actually spending on things. You’re probably spending way more on things like food and entertainment than you think, so it’s important to take a hard look at where your money is really going.
Maybe you think you’re only spending $200 a month on dining out, but if you take a closer look at your various accounts and add everything up, you’ll probably realize you’re really spending double that. It can be eye-opening to take an honest look at your expenses, but before you get too down on yourself about it, remember that this is your starting point and you’re going to take charge of your finances from here on out.
2. Utilize Auto-Draft
Auto-draft is a lifesaver when it comes to your financial health. It’s a great idea to have your monthly bills on auto-draft so you don’t get hit with any late fees or have your electricity turned off because you forgot to pay. While it’s handy for bills, you can also use auto-draft to pay yourself. Set up an auto-draft so that every month, a portion of your paycheck goes right into your savings account. It doesn’t need to be a large amount either. Maybe all you can afford to set aside each month is $100. Start with that! Over the course of a year, that’s $1,200 dollars you've saved!
You might be wondering why this is so important. First of all, it’s wise to have an emergency savings account for the various curveballs life might throw your way. Health issues, job instability, car problems – these things are bound to pop up at some point in your life, and you’ll be way less stressed if you have a monetary cushion. We’re living through uncertain economic times at the moment, so it’s also a good idea to have three to six months of living expenses saved, just in case you lose your job.
You’re probably spending way more on things like food and entertainment than you think.
3. Set Simple Budgets for Things That Are Easy To Track
Once you make sure your bills are getting paid on time and you’re more aware of how much you’re spending on a monthly basis, start setting budgets for simple expenditures. Your grocery bill is a great place to start because you probably go grocery shopping 1-2 times per week, so it’s easy to keep track of how much you’re spending. Every time you go to the store, either save the receipt or write down the amount you’re spending. Once you realize how much that is, set a number for how much you’ll allow yourself to spend each week and do your best to stick to it.
This is probably another area where you’ll quickly realize you’re spending far more than you initially thought. That’s especially true in our current economy, where grocery prices are up about 12%. Eggs alone will cost you 32.2% more today than a year ago. While you’re perusing the aisles, look for places where you can swap out the name brands for generic in order to get your bill down.
4. Remember That Small Changes Can Add Up
When you’re sticking to a budget, there are some sacrifices you’ll have to make, but they’re for a good cause! Skip out on Starbucks, make your own lunches instead of eating out during the week, and limit your online shopping. I love a good Amazon Prime Day deal as much as the next gal, but is it really a “deal” when you didn’t even need that Nespresso machine in the first place? Even when it comes to small purchases like a cup of coffee at Starbucks, those treats can add up! Let’s say you get a $6 Starbucks latte every morning, M-F. That’s $30 per week and $120 per month!
I’m not saying that you shouldn’t treat yourself every once in a while, but make sure it really is every once in a while (or else you don't really appreciate it anyway). Our daily habits and routines are the foundation of our life, and when one of those habits is a drain on your bank account then it will be difficult to improve your financial wellbeing.
Just because you’re on a budget doesn’t mean you have to be miserable.
5. Find a Budgeting Tool That Works for You
I know we hate spreadsheets, but just hear me out. Do me a favor and open up your iPhone. See that green “Numbers” app icon that looks like a bar chart? Click on it, then press the + button to create a new sheet and use their simple budget template. There, you can plug in your monthly income and expenses to create a well-balanced monthly budget. And you won’t have to do any math yourself!
You can easily customize this simple budget (and even put it in fun colors!) to get a better view of where your money is actually going and how much you can expect to save each month. I started using this tool a few months ago and it was kind of fun to play around and figure out how I can make my finances and my lifestyle work in harmony, instead of against each other.
6. Be Realistic
It’s great that you want to be more conscious of your finances and rein in unnecessary spending, but don’t forget that life happens and you still need to enjoy yourself every once in a while! When you’re creating your perfect budget, make sure you also set aside some “fun money” and allow yourself to go out for occasional drinks or a movie with friends.
Just because you’re on a budget doesn’t mean you have to be miserable. In fact, it’s the opposite. Now you can enjoy yourself with your friends and splurge every once in a while, all while knowing that your finances are in good shape!
That wasn’t too painful, right? Budgeting might seem overwhelming at first, but it really comes down to one simple equation: money in vs. money out. You don’t need to be a mathematician to understand that.
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