How To Create A Budget You Can Stick To
I like to dream small when it comes to budgets and most of the time it comes back to bite me.
I have the best of intentions every single month to stick to my small budget and start saving 30% instead of 20% that most people aim for.
Budgets are hard to think about in general, especially with the holidays coming up, but they are so important.
But HOW do you figure out what your budget should be? Well, I'm not an expert but through my last year of saving as much as possible, I've learned a few things.
1. Track your expenses for 3 months
3 months is one quarter of the year. Naturally, each quarter brings with it a new season and expenses. What you're concentrating on is getting an average of where your money is going and how much.
Spend how you normally would for those 3 months and after that you'll have a better idea of where you can start cutting out the extras in your monthly spending.
2. Find the patterns of your spending
After tracking for that long, you'll start to see a pattern. Our willpower can't always be on and sometimes when the weather gets cold it's hard to resist that hot cup of coffee on your way into work. Identifying your spending weaknesses is the first step to finding solutions!
3. Don't cut your spending drastically
Just like with a diet, once you say, "I'm quitting this cold turkey," the first thing you want to do is spend, spend and spend. For awhile your willpower will hold up and help you, but before you know it you'll have a day where you start to spend like crazy.
4. Track every single purchase every single day
Tracking your spending is great, but it does you no good after you've established your budget to only check it after the month is done. You need to know how much you're spending each day and keep yourself accountable to not going over budget.
5. Have more than one account
I technically have 3 accounts. One that is connected to my debit card and has a savings and checking built into the one number and a separate savings account that isn't connected to a card or checkbook. This makes it harder for me to access the funds and is an added layer of protection from my spending.
6. What is left over should go straight to savings
Literally every dollar counts. Only spent $24 of your $25 budget? Move that extra $1 right into your savings account. Seems like it isn't going to make a difference but do it every month in every category of spending and you will be amazed how quickly it starts adding up.
7. Set small goals every month
I love setting goals small goals every month, especially when it comes to $0 days. I look at the month before and challenge myself to add one more day to the previous month. Last month in September I had 8 days where absolutely no money was spent, for October I'm already challenging myself to hit 10. That would mean that 30% of the days in October I didn't spend a penny. That's a pretty solid accomplishment and it helps me decide if I really need that coffee or not.
8. Pick a method that works best for you
I love the envelope system, but I don't pay for anything in cash because I use a card to earn fly miles. So I created a custom excel sheet that helps me electronically track my expenses every day so I know how much is left in each digital envelope. You can read more about my budgeting system and how to set up your own digital envelopes here.
9. Set up a meeting with a financial planner
It is really intimidating to talk to someone about your debt, dreams and defeats but it is invaluable. I met with a financial planner for the first time this year and he helped me figure out a plan for my student loans, got me set up with car and renters insurance and even helped me open my first Roth IRA. If you're interested on how you can do the same, send me an email today at firstname.lastname@example.org and we can work together to make those dreams into reality.
10. Be kind to yourself, saving money and budgeting is hard
There are more days than I can count that I have felt like I was NEVER going to hit my goals. Saving money is a matter of willpower and delaying gratification, two things humans really aren't the best at. Getting that morning coffee or the new pair of shoes feels really amazing at that moment, but in the long run seeing that bank account hit your goal number feels better than anything.