Don’t let the idea of budgeting bring you down. Figuring out how much money you have coming in and how much you have going out can reduce your stress levels and even help you save for a rainy day.
These four budgeting basics will be helpful for first time savers as well as those entering retirement.
Know what you’re working with
Look at your bank and credit card statements to determine your recurring expenses. These might be as simple as rent or electric or a bit more variable like landscaping where the bill is paid monthly but the amounts often vary. Repeat this process for quarterly or bi-annual expenses such as life or homeowners insurance. Subtract all the expenses from your take home pay and what’s left is know as discretionary income. This can be used for a fun night out and is probably a nice thing to do once in a while. But you should seriously consider paying down some loans or saving for a rainy day. It’s the unexpected situations like home and car repair or illness that can really throw off what would otherwise be a solid budget.
A little bit at a time
If you’re feeling overwhelmed, start small and pick one area of your life to budget for. Maybe bring a lunch to work instead of going out. Do you have a daily coffee habit? Invest in a nice travel mug and brew your own at home. This could easily add up to $40 or $50 bucks a week. You could add an extra $100 per month towards a loan payment and still have some left for the rainy day fund.
Review your budget weekly, especially when you’re just starting. Sunday night can be a good time to check the previous weeks spending and will help to plot your course for the new week. Put it on your calendar and treat it like a business meeting. As time goes by monthly budget “check ins” should suffice. These frequent meetings will help you adjust your budget if you foresee an unexpected expense and will allow you to return to your previous course with very little disruption.
Budgeting should not make you feel compromised. It should make you feel in control and confident about your financial future. Start early and contribute regularly to savings or debt reduction. Once you start seeing that nest egg growing you will feel both a sense of accomplishment and relief that you are in control of your money and not the other way around.