How to Budget Successfully
We have all heard it before, make sure you budget your money, spend less than what you make and try to save what extra amounts you can. When you are out shopping and you see those awesome pair of shoes or that amazing cell phone case that you have to have, it’s so easy to just pick the item up and swipe the credit card if you don’t have the money in your bank account. You reason with yourself: “I can pay it off later, no worries.” Then the credit card bill comes in later that month and you realize: I can’t pay off this credit card this month because the balance is too high and I have to eat. More and more Americans are dealing with this daunting shadow over their shoulder waiting to swallow us up by the frantic calls from debt collection agencies.
Budgeting Your Money Should be Synonymous With Discipline
Discipline is the number one positive thing you can do to ensure that you are being fiscally responsible. Buying things can become an emotional enterprise — you feel you need to have that cell phone case then rationalize with yourself saying I can pay for it later because of credit. This mindset of getting what you want, when you want, is not the best way to get ahead. Try to think through every purchase you make and rationalize the pros/cons with it before buying the item. Do you actually need the item to perform a task? Will this put you more in debt? Will it be necessary for your day to day living? How long will I have this item? These are the critical questions you should be asking yourself and it takes discipline to think these things through while you are in the store.
Tackling Your Bank Account
Once you have practiced discipline on your purchases, the next thing to do is focus on your bank account. There are free apps out there for budgeting your money and navigating your finances. Your bank may have something on their website that will calculate your bank activity at no extra charge. If they do, use this services in order to help you see where most of your money is going, and pinpoint your spending habits. Look at what you spend on rent/mortgage, car loan, credit cards, food, gas, entertainment, phone, cable, electricity, trash, etc. Calculate those up and see what you are spending the most on – it may surprise you when you see how those trips to get a fountain drink at a fast food place adds up or how much you actually spend by going out with friends every Friday and Saturday.
Assess the damage
Once you have checked out how you are spending, look and see where most of your money is going. Do you really have to go out every weekend to the bar or could you save some money by buying a bottle of wine and inviting friends over for a game night? Could you just buy the soda at the store versus going through the drive thru? Look at what could you scale back and what is not really necessary in your spending. Now, set a goal for next month on how much you will allow yourself to spend in each category. If you have surplus income once all the essentials are covered, put some of that back into your savings, delegate more money into your retirement, or passive income investments.
Benchmark Your First Budget and Modify as Needed
Now that you know what your expenses truly are, use that as a benchmark to try to improve it every month. Set an appointment on the calendar in your phone every month and spend some time looking at what you did well and what you didn’t the next time around. If you perform well in some areas and not so well in others, try to reason why you went wrong and reallocate what you will spend the next time. The more you do this, the easier it will get and you will find yourself spending less on things that you don’t need and more money in that savings account.
Get an Emergency Savings Account
Take action and get an emergency savings account for those unexpected circumstances. It is a general rule to have enough in your savings account to live on the necessities for three months. The budget exercise listed above will tell you how much you need to save. Look at your utilities, rent/mortgage, car payments, gas and food then do what you can to add to the savings account until you have that amount available to you. If you are lucky enough to excess funds available, make sure that you are putting more of that money back for your retirement or other passive income investments. A financial advisor could assist in this process if you don’t know all the options available to you. They can help put your retirement plan into action and to help you achieve whatever financial goals you wish to attain.
Budgeting is a useful tool that we do not always utilize to our advantage. Anxiety sets in when you don’t have enough to pay your bills in a timely fashion which can adversely affect our health. No one likes to live with that constant anxiety of how you will be able to make the next payment on your car before it gets repossessed. The key is discipline in your spending habits and having a plan on how you will save your money. Doing this simple task on a monthly basis will only get you farther ahead, increase the odds of improving your health, and make you more financially successful. Your future is in your hands, so why not make it great?
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