How to create one and stick to it!
Creating and sticking with a budget is the single best thing you can do to take and keep control of your money.
The first time you take a serious look at where you're spending your money and where there is room to make adjustments, we'll warn you - this can hurt. It's usually not pretty. But once you get a handle on it, managing and living within a budget will reap all kinds of rewards.
It's actually pretty easy to get started:
- Write down your monthly income. Include the take-home amount on your paychecks and any other money coming in, such as child support, freelance income, etc.
- List and total your monthly expenses.
- Fixed expenses. Rent/mortgage, car payments, car insurance, student loan payments, etc.
- Fluctuating expenses. These are things that might vary slightly from month to month, such as gas, utilities and groceries. And don't just guess - take a look at the last 2-3 months' worth of bank statements and average out what you're really spending.
- Discretionary expenses. Clothes. Entertainment and dining. Again - don't just guess. Look at what you've actually been spending. Chances are, you'll be very surprised.
- Set a savings goal.
- List and total annual periodic expenses, then divide over 12 months for your average. These include car maintenance, haircuts, auto tab renewals, holiday gifts, etc. Transfer this amount into savings each month for safekeeping, and use it as needed.
- Determine an aspirational savings goal designed to build your savings balance - 2%, 5%, 10%, but start somewhere.
- Set a debt pay-down goal.
- Go beyond your minimum monthly payment on your credit card. Set a goal that will actually move you toward zero balance.
Now you're ready to set your budget. Is your monthly income less than all of your expenses, savings and debt reduction goals? Then make some adjustments - live within your means. If your monthly income is greater than the sum of the various outgoing categories, then up your savings goal or put more toward paying off debt.
Budgets might seem like a big buzz kill, but take a moment to consider the benefits. Budgets put you in control of your money. They give you the freedom to set bigger financial goals and reap bigger rewards. And with all of that extra cash you accumulate through paying down debt and increasing savings, you can treat yourself every now and then.
Want to learn more about paying down debt, increasing savings and setting a budget? Find a credit union
that works for you and set up an appointment to talk with one of their money experts.