While money does not always lead to happiness, it can certainly affect your mood sometimes. At the end of the month when your bills are due, things can get a little stressful, especially if you are living paycheck to paycheck. Creating a budget allows you to know where your money is going, so you will not have to be down in the dumps at the end of every month. A budget is simply a plan for how to spend the money you have each month. The tricky part, though, is sticking to your budget! In this post you will learn 5 steps for how to make a budget and stick with it.
How to Make a Budget and Stick With it
1. Know Your True Income
In order to plan a budget, you need to know how much money comes into your home and how much goes out. In step 2, we'll talk about how much goes out. For now you need to make note of how much money you truly have coming into your home. Your net income, after taxes and payroll deductions is what you will be budgeting. Add any other income, like government credits or other income supplements. Calculate how much you have on a monthly basis. This is your total net monthly income.
2. Track Your Spending
Now take at least one to two months to track where you are spending your money already. Keep receipts and make a categorized list of your spending. Doing this allows you to get a good grip on just how many bills and other expenses you have. It will also let you see where you're maybe overspending and where you're not budgeting enough. Perhaps you will find that you did not allow enough money for your fuel expenses, and you can tie that directly to too many lattes at Starbucks on your way to work. In this step, simply make note of this.
3. Set Goals
Why are you making a budget for your income? Is it so that you will be able to get a nice emergency fund set aside? Is it so that you can have a vacation fund for a special trip next year? Maybe you just want to stop living paycheck to paycheck. Knowing that there is a ‘pot of gold' at the end of the rainbow will help encourage you not to overspend. Write down your budget and money goals and keep them where you can see them.
3. Make a Plan
Once you've tracked your spending, you need to make a plan given that information. Your spending history will show you what you HAVE to spend money. It will also show you what your habits are. From there, you can allocate what has to be spent on things like your housing, vehicle and other fixed expenses. Then with whatever is leftover, you need to plan out your flexible or variable expenses. Make cuts elsewhere to make sure that you are not overspending in other categories. If you find that you have extra left over after that, be sure to make a plan for it. Do you need more money in an emergency fund? Do you need to top up your retirement account? Pay down your mortgage? Save for a trip or kid's schooling? Decide how any extra money will be spent before you have it, so you don't waste it. Do not just think of it as extra spending money.
4. Practice Self Control
One of the biggest reasons many people go over their budgets is because they do not have self-control. Some people just browse the internet for fun and think they are just window shopping. Next thing they know it will be on their front doorstep a few days later. If you have a hard time telling yourself no, do not tempt yourself to begin with. If necessary, put a sticky note for yourself nearest the thing you spend frivolously on. Like on your phone's home screen if you're prone to ordering Starbucks from your phone. Or on a sticky note on your desktop if you shop online on your lunch hour. Heck, stick one to your wine bottle if you frequently order things you don't need online after having a glass or two while scrolling through Pinterest on Friday night! Practice some self-control and remember that prize at the end of the rainbow (meeting your goals) will be well worth it.
5. Get Your Spouse on Board
Many marriages suffer because of financial turmoil. A budget can help you communicate financially with your spouse. When you make a budget, getting your spouse on board can help you both stick with it. If you’re working hard to preserve the budget and they’re not – or if you're the spendy-pants and you need help keeping yourself in check – this team work will really help. Accountability will really help you both to stay on track!
Creating a budget and sticking with it may take some time. No one is perfect the first time they create a budget. Follow these tips though and you’ll be well on your way to strengthening those budget muscles.
Do you struggle with sticking to a budget? Where do you have the most trouble?
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