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Whether you’re saving for your dream apartment in Manhattan, for retirement or something else, having a budget is a must. Surprisingly, only about a third of Americans say they maintain a household budget, according to a recent Gallup poll, which means if you have one at all, you’re already ahead of the game.
The goal of any budget is to help control spending so that you can spend less than you make, while focusing spending on what matters the most. No matter how you decide to do it, your budget should meet that goal. For those who truly want to make the most out of their financial situation, consider these tips for the most effective budgeting possible.
1. Start by Tracking Your Spending
Before you sit down to create your budget, it’s important to understand how much you’re spending. Tracking every dime spent will reveal just how much those tiny purchases can add up over time – like that daily Starbucks latte or monthly subscriptions you forget you had even signed up for. Ideally, aim to track for spending for 30 days, but even doing it just for a week can provide the important information you need to learn about your spending habits.
2. Start with the Most Important Categories When Creating Your Budget
Begin your budget with the most important categories, meaning the necessities for you to live,like shelter (rent or mortgage payment), food, utilities, transportation and basic clothing. Once you know what you absolutely have to spend on, you can fill in the other categories, such as entertainment.
3. Pay Yourself First
As the goal of budgeting is usually to save, helping you to spend less than you make, one of the best ways to accomplish that is to pay yourself first. Don’t simply save what you happen to have left over at the end of the month as there’s likely to be little left. Save first, and then spend the rest. If you can, have a portion automatically taken from your paycheck or checking account into your savings account, so avoid the temptation to spend.
4. Work on Paying off Debt
If you have debt, make it a priority. Use the debt snowball method, which is arguably the best way to get it paid off as quickly as possible. What you’ll do is make the minimum payments on all debts other than the smallest – pay as much as you can on that one and once it’s gone, take that payment and apply it to the next smallest while making the minimum on the rest, and so on.
Every time you pay a debt off it helps to keep you motivated, and before you know it, it will all be gone – just avoid the temptation to create any new debt.
5. Plan to Adjust Your Budget Monthly
As monthly expenses, and sometimes income, can change, plan to adjust your budget every month, planning for things like an oil change on your car, back-to-school supplies, and special occasions like birthdays and vacations. When you’re prepared, it takes a lot of stress off your shoulders and makes sticking to a budget much easier.
I hope you found this useful information. Money matters in your health and well-being!
Take back your health America!
Wendy Love Edge