FACT: The sooner you learn how to effectively budget your money, the better your chances will be to live your best life.
Following a budget should become a lifelong habit. It will help you successfully develop and maintain a realistic spending plan that allocates funds to reach your goals.
First, you must identify those goals, then determine whether they fit into the needs or wants category. Once you’ve done this you are ready to allocate your funds accordingly. It is most important that you include wants in your budget. They serve as rewards and motivation to continue addressing your needs.
The most important budget item is saving. Many people save in some form or another, but do not acknowledge it on their budget. Savings should be listed as a line item in the expense column of your budget. I recommend that you commit an amount to savings BEFORE you consider all other expenses. Pay yourself first!
Savings should start out as a ‘life happens’ expense. Have these funds available for emergencies so you don’t have to forego paying your rent or a utility bill, in order to cover unexpected expenses. As your ability to save grows, add more sophisticated tools to the mix such as high interest savings or retirement accounts. See my article, “What Type Of Budget Works Best For You?” for a more thorough discussion about different types of budgets.
Further considerations for successful budgeting include:
Start by saving your change. Everyone has the ability to save, even if it means starting by saving your coins. I repeat my favorite mantra: “Do what you can, with what you have, where you are.” You’ll be surprised at how much you can save by socking away your change.
Determine your preferred method of payment. Some people pay cash, others use credit. The latter works best for me. I charge EVERYTHING because I do not do well with cash. My goal is to always pay off my balance in full each month. Of course, I occasionally fall short on this goal. After all, #@&% happens, but I do my best because paying off debt is the best medicine for living a healthy, stress-free life. Whether paying in cash or credit, the key is to eliminate debt.
While you’re at it, get a cash-back credit card. Earn rewards on every expense you charge. I am what credit card companies call ‘a dead beat.’ I charge everything, pay my debt in full and collect cash back for using my cards. Each year, I earn about $200 in rewards and always decline my card company’s offers to use the money to pay down my debt. I request a check and put that found money into my savings.
There’s no shame in shopping at the dollar store. The dollar store is not the best place to buy everything, but it does offer some great bargains. I especially like to buy greeting cards, books and other items that will eventually be thrown or given away.
Borrow as little as possible and live below your means. Simply stated – The more you borrow, the more you owe. The more you have to have, the more you have to maintain. KISS (keep it simple strategy) is the way to go.
Forget all warranties and most prepay discounts. Many products come with the offer the purchase a warranty. If the item is good quality, it will likely outlive the warranty. So don’t waste your money. And do not pay bills in advance unless they offer a substantial discount. The only bill I prepay is my car insurance because the monthly and quarterly installment fees add up. And, if you do pay in advance, don’t forget to find out whether you can be reimbursed for unused service.
Here’s my best advice. Managing your money is a task you have to do for the rest of your life, so find ways to make it fun. And again, what’s most important is that you treat yourself to those wants on your budget. if you are doing it right, you deserve them.
There are many other ways to successfully manage your money. Pop any of your thoughts in 'Let's Chat."
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