How to Stay on a Budget for Good This Time
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- By GoBankingRates Staff
- October 12, 2012
Many people equate living on a budget as some type of punishment, but it should really be viewed as a strategy for saving money and gaining financial independence.
When people learn how to budget, they can get the sense of security that being debt free and having a solid savings account will provide them. Staying within a budget will allow you to free up money in order to start building an emergency fund, bank enough for a down payment on a home or even save up for a lavish vacation.
How to Stay on a Budget
There are a few simple steps you can implement to set up a budget that you can follow. The most important thing is that you get an accurate picture of how much money you’re saving and spending in comparison to what you earn. Then it’s a matter of re-prioritizing where your money is going so that you can meet your goals.
Step One: Establish Your Goals
There is no point in living on a budget if you don’t know what you’re trying to accomplish. Write down your goal(s), whether it’s to build an emergency savings account, pay down debt, save for retirement, etc.
Step 2: Build a Spreadsheet
Next, inventory all of your monthly income sources, like your job and any interest income, as well as all of your expenses. The way you track all of this can be as simple or sophisticated as you want — the point is that you get a clear understanding of your household balance sheet; the method is not important.
Many people choose to do this with a spreadsheet, which is easy to set up and performs the math for you.
There are also a host of online budgeting tools you can use, which will automatically track your bank accounts, credit cards and more, graphing trends and helping you identify problem areas.
Once your budget is complete and you compare your income to expenses, you will find out if you’re in the “red” or “black” at the end of the month. These results will guide you in making the appropriate behavior modifications to set yourself on the right track.
Step 3: Cut Expenses Where Necessary
If you are in the red, you know you need to cut some of your expenses and make an effort to pay off any debt. If you are in the black, examine how you can adjust your spending so that more income is allocated to savings goals.
With the overview complete, you may now implement your strategy for staying within budget. To help you remain on track with your plan, try some of these tips:
- Avoid using credit. Leaving your credit cards at home so you do not fall victim to shopping impulses.
- Spend cash only. On payday, take out enough cash to last you until the next paycheck and only use that money.
- Don’t go overboard. Being too restrictive with your budget will leave you feeling burnt out. Make small cuts across the board so that you can still enjoy things like dinners out, going to the movies and shopping — just less often.
- Eliminate interest. Transferring credit card debt to a 0% balance transfer card will help you pay down your balance faster. Just be sure to pay off the card before the introductory 0% APR period is over.
- Reward yourself. Find new ways to reward yourself for staying on budget that don’t involve spending money.
Staying within budget is one of the greatest stress relievers of all times! When you gain control of your money (not the other way around) will you feel secure and free to do more with your wealth.