A survey by Credit Donkey last year found less than half of Americans have built up an emergency savings account fund of just $500. But living paycheck-to-paycheck isn’t always the product of financial irresponsibility; sometimes there’s a gap in understanding the fundamentals of managing and budgeting your money.
The general rule of thumb when it comes to a rainy day stash of funds is maintaining about three months’ worth of expenses — and it’s clear Americans are falling short of reaching important financial benchmarks.
So if you have already successfully budgeted your money, the next and most important step is to evaluate your budget and sustain your momentum from last year into the next.
Tallying up the hard numbers in terms of income is necessary for you to recognize how much you really have to work with each month. Incoming funds like take-home pay, Social Security and child support, as well as any other financial assistance you receive, should be added together.
Once you have your income totaled, following a budget requires assessing your monthly expenditures in comparison. Determining necessities versus “extras” is the trickier part, and takes a bit of sacrifice on your end. For example, paying the mortgage or rent are typically non-negotiable expenses in a budget, while a premium gym membership is not essential to your financial well-being.
Does all this sound familiar? If you’ve successfully created and implemented a budget worksheet, this kind of decision-making is likely a part of your everyday routine already. The next challenge is to determine where to go from here.
3 Things to Do After Following a Budget
1. Start Attacking Your Personal Goals
If you haven’t given it any thought yet, it’s time to buckle down and figure out what all your effort is accomplishing. Sure you get the satisfaction of being balanced in your spending by budgeting your money, but now is the best time to broaden your scope. (Photo: Terren in Virginia)
What other goals do you want to accomplish long-term? Common goals include growing a substantial emergency savings account, paying off debt and saving for retirement.
According to financial gurus like Dave Ramsey, paying off debt should be the main objective only when a $1,000 emergency reserve has been established. To be safe from temptation it could be a good idea to use an online savings account for your emergency fund, leaving it harder to dip into. On the other hand, our friends at LearnVest encourage you to start working toward your retirement goals first for reasons such as the growing rate of inflation, longer lifespans and a weakening Social Security program.
Depending on your individual circumstances, how you prioritize your goals will undoubtedly vary.
2. Perform Monthly Financial Health Checks
Budgeting your money would be all too easy if you only had to follow a budget for a short period of time. On the contrary, following a budget is an ongoing process.
Checking in with your budgeting worksheet or expense allocation every month is important, especially when financials change along the way. For example, things like getting a new puppy (i.e. food, veterinary bills, etc.) or advancing to a higher paying position can shift your budget in a significant way.
3. Stay on Track Using Financial Tools
Budgeting your money the old-fashioned way with a pen and paper isn’t necessarily the wrong way to go about it, but there are plenty of online tools that not only help you record your monthly budget, but also provide visuals that track the goals you’ve set for yourself.
An online tool that I regularly rave about is Mint.com. Mint is a comprehensive portfolio of your finances, from budgeting within specific categories like restaurant budgets, gas budgets, utility budgets and more. Additionally, it takes your goal of saving for retirement, for example, and turns it into a deadline-driven objective complete with recommended monthly contributions to help you reach your goal by your specific due date.
Mint also allows you to see how your spending habits compare to the national average, and offers users a mobile app so you always know where your budget stands when you’re out on the town.
Following a budget is just the first step to achieving financial peace of mind, but by using the above tips, you’ll slash goal after goal off your to-do list.