If you’re like us, the current rate of inflation has you pondering your finances. With everything getting more expensive, from gas to groceries to housing, it’s a great time to take stock of your budget. If you don’t have a formal budget or keep your budget in your head, now is the perfect time to build your budget and more importantly, stick to it!
Creating a Budget
First of all, make a realistic, reasonable budget. You don’t want to set yourself up for failure. By putting it all down on paper (or a spreadsheet!) you not only see what money is coming in and what has to go out, but you can establish saving goals for big things like retirement or smaller things like vacations and special purchases.
When you are creating your budget, make sure that you pay yourself first. What does that mean? Paying yourself first is having a percentage of your income that goes straight to savings or retirement accounts before you begin paying your monthly living expenses. By paying yourself first, you are building a nest egg that will set you up for the future as well as creating a cushion for financial emergencies.
Also make sure you are including line items for things like clothing and entertainment. Setting aside a little money for fun is a great way to keep yourself motivated to stick to your budget. Sure, these are great areas to cut back in when you are trying to save money but by planning for them, your budget won’t be blown if you need to buy new clothes for work or you want to grab a drink with a friend. If you’re budget is so strict that you can’t enjoy your life, you are more likely to quit budgeting altogether.
Once you’ve created your budget, make sure you are regularly checking in on it. Spending can easily get out of hand if you aren’t monitoring it. A daily check-in ensures that you see exactly what you are spending and where your money is going.
Here are a few more tips that can help you start and stick to your budgeting goals:
The No Spend Challenge
If you buy whatever you want whenever you want it or just love to shop, this is a great way to “shock your system” and change your mindset when it comes to spending money. Also called a spending freeze or zero spend challenge, it is a commitment to not spend money on anything that’s not a necessity. With every purchase, ask yourself do I NEED this or do I just WANT this. If the answer isn’t NEED – then back it goes!
You can do this challenge for a week or a month or even longer – whatever time frame makes sense for you to reset your shopping brain. Yes, it’s intense but it’s a very effective way to change your spending habits. And you might be amazed by how much money you save. Start your No Spend Challenge by putting down in writing what qualifies as a necessity and how long your challenge will last. A great way to make it fun is by challenging your friends or family to take the challenge with you and see who can save the most money!
Sleep on Bigger Purchases
This will be a piece of cake after the No Spend Challenge. If you see something you want to buy or have a big purchase to make and it’s not an immediate need, take a few days to think about it. How will it affect your budget? Will it throw off your savings? Will it make your life better? If after you weigh all the benefits and you determine it’s good for you and your budget – go for it! If you’ve forgotten about it after a couple of days, you obviously didn’t need it.
Be Mindful with Meal Planning
This tip encompasses a lot of things that can negatively affect your grocery budget as well as your entertaining/dining budget.
Plan all your meals each week – breakfast, lunch dinner and even snacks. By planning your meals, you won’t be as tempted to grab fast food or hit up the snack machine, which may seem inconsequential at the time but can quickly add up over a month. And meal planning isn’t just good for the budget – it’s good for our health since we tend to eat better when we have a plan.
Once you have your meal plan in place, it’s time for grocery shopping - another place that can easily send your budget off the rails. Keep these things in mind when grocery shopping:
- Make a shopping list based on your meal plan and stick to it. Don’t be tempted to buy something just because it’s new or on sale. If it’s not on the list, move along.
- Don’t shop hungry. (If you’ve shopped hungry, then you know!)
- Make sure to use everything you buy. Food waste is expensive (not to mention bad for the environment.) By having a meal plan and not over shopping, you shouldn’t have to throw away rotten produce or expired dairy.
Stop Paying Fees
This one covers the gamut from subscription fees to bank fees to late fees.
In this day and age, there are so many things that come with a monthly fee. If you can imagine it, there is probably a subscription available for it. Everything from music, tv and movies to food boxes, clothing and even legal services. With so many subscription services, it’s hard to keep track of what we’ve actually signed up for. If you have multiple services – take minute to list them with what you are spending on them and see what you may want to cancel. Do you really need to pay for Apple Music and Spotify? How many television streaming services do you have and are you using all of them? All those small fees can add up quickly!
Also – take a look at banking and credit card fees. If you are paying monthly fees plus transaction fees on your bank accounts, it may be time to look at other options. There are lots of no-fee accounts out there and they may even be available at your bank! Also be cognizant of transaction fees and try to avoid them if possible. If you are carrying credit card balances, check the interest rates and try to negotiate lower rates on your existing cards or look for credit cards with low introductory APR rates and transfer your balances.
And finally, make sure you are paying your bills on time. Late fees can range from a couple of dollars to upwards of $20 depending on the bill. If you find yourself paying bills late because you forgot something was due, consider automating anything you can so you don’t have to worry about that missed payment and late fee.
Budgeting may seem like a drag but is important for our financial well-being and a helpful tool for reaching those important savings goals…like retirement and that dream vacation you’ve been wanting to take. Focusing on the rewards makes budgeting a lot more fun!