Yesterday I covered the fundamentals of a budget and I figured it would only make sense to provide a few additional tips today to help you ensure that you stick with your budget. Financial budgeting can work and you need to remember that it is more of a guideline than set rules.
Pay yourself first
The most important thing when it comes to budgeting and saving money is that you set aside money into your savings before you do anything else. I will not give any percentages or numbers because every persons situation is unique. However, the general consensus is that you should aim to save AT LEAST 10% of your paycheck. What form of savings you decide to do is up to you. Most new college graduates will aim to aggressively save for that first home purchase. Homeowners may strive to save more money for their retirement. You get the point, plan your savings accordingly.
Minimize your fixed costs
I know it’s impossible to completely eliminate your fixed costs because we all need a roof under our heads and a means of transportation. With that being said there are many fixed costs that we all should strive to reduce. As a college student or new graduate you must really ask yourself if you need all of those subscriptions or that deluxe cable package. I’m not saying to eliminate all of your fun subscriptions because believe me there are some monthly subscriptions I will never get rid off. The trick is to try to eliminate fixed costs that you know you could live without and wouldn’t really lower the quality of your life.
Embrace budgeting tools & budgeting software
Let’s be honest, when trying to get our finances under control we need to track our spending for the first little while. Trying to keep a mental note of our purchases simply won’t work. This is where personal finance software comes into play. Budgeting tools help us keep track of our spending. More importantly, the budgeting software keeps us accountable for our foolish purchases.
Don’t forget about taxes
It’s easy to make a perfect budget that leaves plenty of room for savings but never ever forget about your taxes. Always set money aside to cover any taxes that you think you will have to pay. I have heard too many horror stories from people about receiving a large tax bill unexpectedly and having to borrow money just to pay taxes.
Plan some fun into your budget
I hate how other personal finance bloggers make it seem like budgets are all serious and no fun. I firmly support setting aside some money for “entertainment” or simply put “letting loose.” I put aside anywhere from $20-40 a week for traveling. Don’t ever feel bad about spending your money on something you truly enjoy or something that helps you recharge after a long week of work/school.
I hope that you guys can give budgeting software a try and realize that it is not as lame as it sounds. I’m extremely positive that I must have missed something so please feel free to share your budgeting tips!
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Having a side account or wishlist fund set up can be crucial for your budgeting needs. It helps you set a goal and work towards savings. Then every time money comes in you can automatically place a percentage into your various funds and watch them grow slowly over time.
I agree with paying yourself first…the first $1000 saved (minimum) should be an emergency fund. After that is banked I recommend saving for retirement. I would also recommend it be put in WRITING before the first dollar is spent.
You didn’t mention exactly how the budget should be formatted. Perhaps that is coming in a future post? I find the “envelope method” to be the most useful, as it doesn’t rely as much on willpower as more digital/electronic methods do. Watching hard cash disappear is a strong psychological tool!
I would like to add three brief comments:
First, save as much as you can. Ten percent is good, but I target something more like 20%, even if I have no specific goal in mind. When you establish a meaningful goal, chances are you have the funds to attain it.
Second, if you’re trying to reshape your budget to reduce the money that you spend, you have to focus on where you spend the most – housing, transportation and food are usually the heavy hitters. Look at large expenditures and frequently recurring expenditures.
Third, there are lots of things that are fun and don’t cost much money. Once a 13 year old complained to me that there wasn’t anything to do. He lived in a 50 acre personal park on top of a mountain and had every outdoor recreational activity immediately available to him. Nevertheless, he wanted to “do something that cost money,” as if that was always the more fun thing to do. Think of free or nearly free things as your first choice for entertainment and recreation.
Clair
@Craig That’s an excellent idea and I know many people that are doing something similar.
@Ken Writing down your goals is something many of us fail to do but it really helps. I find the best thing to do is to write down your goals and stick the paper somewhere very visible beside your bed. This way before you go to sleep and first thing in the morning you will be reminded of your goals.
@Wilhelm Yes I will be covering this soon. With a fairly new blog and a million different ideas running through my mind there are soo many topics I still have to write about.
@Clair Thanks for the detailed comment, you said it best.
The concept of “saving money” is easier said than done for most people. I understand that it is ‘easy and logical’ for some people, but I also understand it can be a difficult habit to break for others.
If you’re looking to save money or change your lifestyle, my advice is to take it in “baby-steps” because it won’t happen overnight. Here are some tips that helped me out.
1. Always pay more than the minimum on any credit card payments – if you don’t believe me you can calculate it for yourself (http://www.csgnetwork.com/creditcardmincalc.html)
2. Use coupons when grocery shopping
3. Try online shopping – it’s saves on gas & they have bigger markdowns (http://www.shoptivity.com)
4. Read a book – it’s cheaper than going to a movie (http://onlinebooks.library.upenn.edu/)
5. Know your budget! (https://www.dl.ed.gov/borrower/BudgetCalculator.do)
Good luck and happy savings!