If you vowed to make 2016 the year to get and keep your finances on track, then you’re probably not alone! After the New Year hype faintly draws away, it’s important to remember why and how you decided to start your budgeting resolution in the first place.
If you successfully started budgeting in January, then pat yourself on the back! The first step to effective budgeting is knowing where your precious money is going in the first place. It can be a daunting task to know how much money you and your family truly spend eating out, or what you spend on your daily lattes; however, when you know what your habits are, you can adjust them to get your desired budget.
If you haven’t started yet, it’s never too late! Start by downloading a cash flow statement and record your income, as well as the various expenses you spend per month. All it takes is a small amount of time each month to see where your hard-earned money is going. From there you can alter your spending habits, and start paying off debt, other bills, or simply making a goal to save more money.
Avoid using your credit card for unnecessary purchases. Your credit card can seem harmless, until the bill comes in and you feel overwhelmed by debt. The interest rate can be up to 25%, so interest charges can add up over months or years’ if the card isn’t paid off each month.
Develop a “cash envelope system” where you cash your paychecks and put the appropriate amount of cash in envelopes for discretionary spending (such as gas, eating out, shopping) and once the cash is gone, it’s gone until next month.
Budgeting can be a scary task because you find out the truth about your spending habits, in addition most people associate budgeting with cutting back. Simple changes to daily life can make a huge impact on your spending habits. Buy too much Starbucks? Buy a 1lb bag of freshly ground Starbucks coffee and make it at home. Eat out for lunch every day? Pack your lunch once or twice a week. That could save you $40-$80 a month, or more!
Don’t lose track of your budgeting goals and stay encouraged! Your wallet and future resolutions will soon thank you.
- Content prepared by Annie Albrecht, Worley Erhart-Graves Financial Advisors