Maybe it was recent financial uncertainty caused by the coronavirus pandemic, or perhaps it was just a desire to make smarter long-term financial decisions, but you’ve probably realized how important a budget is to your overall financial health. Just the act of creating the budget can be enlightening and put a spotlight on ways and areas you spend money that you might not have realized (the classic example being how much one spends in a year if one gets a Starbucks latte every day). However, if you’ve never created a budget before, the task can be daunting, and you may not know where to start. Once you get the process underway and turn it into a routine, you’ll find keeping and maintaining a budget to be an easy and worthwhile task. Here are some key steps to getting it started.
Monitor Your Spending
The best jumping-off point for creating a budget is to track your spending on a regular basis. To help set budgetary goals, an important piece of information is to know what you are spending right now so that you can set realistic and achievable goals in your budget. You can track your spending by hand using an Excel spreadsheet, but there are also free apps (like Mint.com) or premium paid apps (like You Need a Budget) that can help automate this process and provide you added insights. Whatever you choose to do, this is the perfect springboard for creating a solid budget.
Automation Is Your Best Friend
One of the key tools for maintaining a good budget is identifying regular bills and ensuring they are simply always and automatically paid. Taking the day to day management of your bills off your plate can help you see into the bigger picture. This is a good time to automate another aspect of your finances and treat it like a bill: your savings. It can be a great time to set aside even a small amount every month to go until a savings account. Make the transfer automatic, and then just consider it like another bill in your budget.
Tackle One Expense at a Time
When you first sit down with all of your spendings in front of you, it can be a daunting task to tackle your budget. A good plan can be to identify single areas to target first and attempt to work on managing expenses there. Some good areas to target can include working on negotiating your monthly bills like a cell phone or cutting cable television. Another area that can be easy to manage is food spending by dedicating yourself to making instead of buying lunch and only grocery shopping with a list. By hitting and focusing on these smaller areas, you can make a big impact on your overall budget.
Use these tips to begin building your very own budget and focus on creating a buffer “rainy day” fund and building your long-term financial health. If you have questions, please feel free to contact us for assistance!