Creating and sticking to a budget is the most reliable way to keep your finances in check and achieve your short and long term financial goals. Even if you aren’t living paycheck to paycheck, many Americans are, and using simple budget strategies to manage your money can be an important way to curb spending, help pay down debt or save for the future.
The idea of using a budget can sound daunting, and creating one can feel nearly impossible if you’ve never done it before. In reality, creating and sticking to a budget is an exercise in math and discipline, and once you get started, you might find you truly enjoy it. Before you can begin using a budget successfully, you’ll want to take time to establish financial goals that support your values. If saving, paying off debt or simply enjoying financial freedom are goals you strive for, using a budget is the only way to get there.
Here are 5 successful budget strategies we love, to help you hone your financial skills and start saving like never before!
Identify Your Goals
Before you can begin to develop a successful budgeting strategy, you have to take the time to consider what you value and what your goals are. Do you wish to eliminate debt? Save for the future? Travel more? Stop living paycheck to paycheck? Whatever your goals are, identify them and try to keep them simple. Once you know what you want, write it down. This will be the foundation for all of your hard financial work to come
Determine Your Income (After Tax) & Fixed Expenses
To begin any good budget, you have to start with exactly how much income you have (after taxes) and what your fixed expenses are (rent, car insurance, etc.). Put this information into a spreadsheet, so that you can see how much money you’re going to be spending, each month, on the basics. Include your car payments, groceries, gas, pet supplies, utilities, insurance and student loans.
Track Your Spending to the Dollar
Next, you’ll want to take a month and track your spending carefully, to see where you may be overspending or under-budgeting. It doesn’t matter how air tight your budget is, if you don’t track it to the dollar and ensure that you’re staying on it.
Aim to Set Aside 20% for Debt Repayment & Savings
Whatever your goals may be, carrying debt and living without a savings can put you at risk for breaking your budget, and fast. It’s best to plan to set aside 20% of your income to pay down debt and/or put into savings. If you know that paying down debt is a priority, put the bulk of this 20% into debt repayment. If savings are your priority, go ahead and automate your savings each month, so you don’t miss it when it’s gone. You can easily set this up through your bank, to draw out bi-weekly or monthly, depending on your needs and goals.
Revisit Your Budget Regularly
Even once you’re on a solid budget, tracking expenses, saving money and living within your means, life happens and things change in ways that may affect your income, expenses or both. You’ll want to revisit your budget regularly to make sure you’re staying connected to your finances in the present. If you earn a bonus or increase in pay, you may want to adjust your savings. If you lose a stream of income, you may need to adjust your debt repayment plans or savings. Either way, revisit your budget on a monthly basis at minimum, to stay close to your spending.