Budget management is a moving target, and it can be a pain to keep up with. But a solid financial foundation can help reduce stress and improve your life. For example, if you’ve got a trim budget and a well-funded savings account, you can quit your soul-sucking job today. Or on a more positive note, you can easily say “yes” to a once-in-a-lifetime trip when the opportunity arises.
No matter your goals, aspirations, or escape plans, sorting out your budget is a smart move. But before you start Googling “budget styles,” think about how you’ll manage your method of choice. Just as with any habit, it takes time, consistency, and commitment to make it work. Pause and consider these tips before you launch your new budget strategy to help you stay the course.
1. Assess Your Current Cash Flow Situation
You make money, you spend money, and if there’s anything left, you save money. It can be easy to coast through your financial life as you focus on external demands. If you’re on auto-pilot for too long, however, you may be in for a scary surprise.
Avoid the unnecessary panic by downloading the last 60 days of transactions from your debit card and credit card accounts. Choose a comma-separated values file for easy sorting and calculating. Categorize your expenses to see where you’re spending your money today.
If you’re shocked by the results, give yourself grace. This is an exercise in discovery, not critique. Use what you learn about your current habits as you develop a budget that works long-term.
2. Prioritize Your Needs and Wants
Life would be easier if you didn’t have to pay rent or student loans. But skipping those bills could leave you with a less-than-comfortable lodging situation. Use your accounts extract to identify essential and optional expenses so you have clarity on where your money is going.
Beyond food, shelter, and transportation, dig into the intricacies within each category. Sure, you’ve got to eat, but do you need to dine out every day? And when you grocery shop, do you end up throwing away those aspirationally purchased avocados?
Get real with how you’ve been spending your money and pay attention to how you feel while doing so. Generally, your monthly income is predictable, so how you spend it has a big impact. Place more importance on the budget categories that make sense for you. If you love to travel, consider reducing your expenses in categories like housing, transportation, and food. The exchange for smaller living quarters and a basic car can result in an annual adventure across the globe.
3. Develop a Process to Help Reduce Impulse Buys
Marketers know how to get consumers’ emotions right where they want them. Whether it’s flashy packaging, strategic messaging, or an urgent call to action, consumers are the prey. But just because you’re being pursued doesn’t mean you can’t set boundaries.
Impulse buys are quick budget-busters that can separate you from more than just your money. Consistent budget problems can result in long-term savings gaps and missed opportunities. Protect yourself and your financial future by creating a strategy to protect yourself from, well, yourself.
Establish a set of criteria before making a big purchase beyond a certain dollar amount. If $50 is your threshold, pause and ask yourself questions to help incite a gut check. Ask whether it’s needed, whether you can afford it, and whether buying it keeps you from another goal or opportunity. If any of these answers makes you uncomfortable, it’s a sign to skip it.
4. Include Savings Transfers as Essential Invoices
The recommendation to “pay yourself first” is not advice to be ignored. While it sounds pessimistic, you are the only person who will look out for you for life. That’s why saving money for “future you” today is so important.
If your employer offers a match for retirement savings, do what it takes to qualify for that free money. If you have access to a health savings account, maximize your contribution to save for current and future medical expenses. Make sure you get your employer’s contribution to that account, too, if one is offered.
Beyond getting all the free money you’re entitled to, schedule recurring transfers to your savings accounts. Open multiple accounts that can be attached to your checking account for easy transfers and monitoring. Label each one with its purpose — travel, new car, etc. — to keep you motivated and reduce the temptation to dip into them unnecessarily.
Develop a Budgeting Style that Works for Your Life
Now you’ve got a good understanding of what’s important to you and learned some best money management practices. The hard part is behind you, right? Unfortunately, you know that’s far from the truth. Managing a budget requires making the right choices over the fun ones most days. But focusing on the “why” behind your budget can be a big help. And so can choosing a budget style that’s in alignment with your personality and habits.
If you’re an Excel lover, a spreadsheet full of formulas may be perfect. Digital natives may prefer an app-based structure that presents account balances and due dates with one Face ID approval.
Research budgeting styles and sample one for at least 60 days to allow yourself time to get comfortable. If that one isn’t quite right, call upon your inner Goldilocks until you find your perfect match. Before you know it, managing your budget will become second nature, thanks to the tools you’ve put in place.