Starting a new budget can be a difficult undertaking, so why wait? Budgets are necessary for any income level and any lifestyle because you should always know where your money is going, you are in charge.
Budgets aren’t always easy as is the same when starting any new regimen. Everything takes times, practice, and many revisions before it becomes a habit and a way of life. Starting a budget can improve your life in so many aspects because it puts you in control of where your money goes and alleviates the stress spending can inflict. According to studies like Investopedia did in 2019 the number one reason couples fight is over finances. Having a plan is the easiest way to avoid conflict with your partner because everyone involved will know ahead of time what is expected and that you both agree.
Whether you’re planning to buy a house, car, or you want to get out of debt, starting a budget now will give you time to adjust and make changes to have the best results and the most success.
Where to start
Don’t worry, contrary to popular belief this part is easy but may not always be fun to experience. When starting a new budget you’ll first need to investigate your previous patterns and spending.
This can be done 2 ways.
- You can set a timeframe (usually about 1-2 months) and write down every transaction you make and every expense.
- Gather bank statements and/or credit card statements and categorize all items.
Now that you have your spending history, separate it into categories like wants and needs and review your findings. Some may find they spent more on things like groceries, gas, or coffee than originally expected.
Obviously needs are important but wants are necessary too. We need those little incentives to keep going so don’t feel bad for not wanting to let go of your Amazon purchases or coffee from the corner shop; those things are perfectly fine, in moderation.
Now is time to find your method of recording and tracking your spending. It could be a spreadsheet, safe App like Mint from Intuit, a journal or notebook, or budget planner. This will be something you use every day so make sure it will work for you in your lifestyle and keep it some where safe. All persons involved in the budgeting should have access to view and add to this at anytime.
Now, just a few things to keep in mind when getting started.
15 things to do when budgeting
- Be fluid- Things change & you should be ready to move with them. With a good established budget you should be able to field most mild emergencies with just a few changes.
- Keep 2 baseline budgets- One strict and one relaxed. Not all budgeting needs to be restrictive and difficult. Give yourself some room to play and cover rough months with a more relaxed budget and use the strict budget for months you may have less income or need to save for something important.
- Test any new budget for a few months before committing to it and give yourself time to adjust
- Create a list of all of your monthly and annual bills. Average expenses that fluctuate and your monthly income also if necessary (always average slightly low on the income for breathing room).
- Be accountable & conduct weekly budget checks
- Write everything you spend
- Always check your math (do it twice)
- Stops using credit cards (you’re working to build a savings not take from it at a later date). Credit cards that incur interest on purchases take from your income.
- Set goals- On difficult days you’ll need a reminder of why. Why are you doing this: Is it to save money and have financial freedom? Prove a point? Build credit or buy a house? Keep that reason close by, you’ll need it often.
- Review spending and expenses monthly or quarterly to see what can or needs to be cut or changed
- Use a separate account for varying amounts like grocery/household spending, clothes, gas, and extras. It’s safer than carrying cash & keeps you in check. Just be sure to no include overdraft coverage set on this account. Once its empty, you get denied at the register and because no one wants that it will force you to monitor your spending more closely.
- Divide any income over what you estimated between savings and extras/sinking fund accounts. This can work for bonuses and extra check months as well.
- Budget for fun- Don’t take away everything unless you are living in a dire situation with nothing to spare and in that case every available penny should go to savings. Restricting yourself with money has been found to have the same effects as with food restrictions; you’ll eventually binge and we don’t want that. Give something each month toward fun stuff for all parties involved in your household’s budgeting process. This can be as low as $25. Its about what you can afford not trying to live outside your means.
- Budget every dollar- You are in charge, not your money. You tell it where to go and what to do.
- Add all bills to auto-pay
Where do you have to most trouble with spending? Can you add income through a side hustle, part-time job, or get a better paying position? How long do you need to achieve your goal? Do you and your partner have trouble agreeing on your budgeting goals?
These are all things that will need to be revisited quarterly or yearly depending on your financial situation. Keep track and look back. Have things changed for the better or worse? Always use the information you collect to help you move forward.
Starting a budget now will allow you to gather information early in your investigation period so that you can finding your footing early in 2021. Don’t wait any longer to have the financial freedom you want and need.
Most Americans couldn’t survive a $400 emergency, don’t let that be you. Start monitoring your spending today and get on the road to financial security. Thanks for reading!