Six Really Obvious Ways to Budget Better Than Ever
Living on a budget is crucial to financial health. But have you ever thought you could be doing it better? Well, here are six game-changers that will really change the way you do budgeting.
1. Categorize your spending.
A huge game changer for us was to categorize our different expenses. By creating different budget “buckets”, we were able to compartmentalize our spending and better track what was coming in and going out, in regards to the budget. It doesn’t have to be extreme, like a checking account for every category – it can be an envelope system or some other way of tracking your categories. But having the expenses set up into different categories provides a great means of tracking those monthly expenses, and ensuring you are staying within the budget on those items. Categories could be clothing, personal, groceries/household, gas, vehicle, healthcare, etc.
2. Make lists – and stick to them!
When shopping for groceries, gifts, or household items, it’s important to create lists of what you need and to stick to them. Making a list of the items you need prior to leaving the house eliminates two things. First, it eliminates the possibility of forgetting items and making multiple trips to the store. Secondly, it eliminates the need for excess spending. When you have a list, you don’t need to make impulse purchases on last minute items, things you don’t need. The important thing to remember here is don’t spend money on things you don’t need. If at the grocery store, you remember you need bread and toilet paper, those are not impulse decisions. Those are items you forgot on the list, that are still needed household items. You don’t need a candy bar or a new pair of shoes.
3. Eliminate obvious excess spending.
This one is a given, but when evaluating your budget, try to eliminate obvious areas of excess spending, areas that can be trimmed down. For instance, a $350 monthly cable bill can probably be reduced. A $600 monthly shopping spree can be cut back. Think back to the second item in the list, focusing on items you truly need. This can be a big game-changer in your budget. After evaluating, you may find a significant change in your overall spending.
4. Set limits on spending.
Within your budget, you should have a monthly spending limit in certain areas – how much you plan to spend on your groceries, gas, utilities, etc. But just because you plan to spend that amount, does not necessarily mean that’s what will happen. You need to find a way to physically limit the amount of money you will spend in each category. For us, that means having multiple bank accounts set up for each category. We have automatic transfers set up, based on our budget, to send money over each pay period. When there is no money left, in the entertainment account, for example, we don’t eat out anymore. It’s a great way to limit our spending. Cash envelopes are another way to do this – evaluate what your weekly or bi-weekly spending is according to your budget plan, and take that money out of your bank account. When the cash is gone, there’s no more money to spend.
5. Set accountability and support.
When living on a budget, it’s important to have a team on board with you. Whether you’re married, single, or whatever your status may be, have someone there to support you. Tell your family about your financial goals, and what you are working towards, so they can encourage you in your lifestyle changes. If you are married, get your spouse on board, on the same page as you with spending habits. Having a supportive team behind you makes a world of difference when trying to live a financially free life.
6. Evaluate your budget regularly.
This one may seem really obvious, but it is so important. Your money needs to be managed, and it will be spent with or without you. If you aren’t regularly checking it, evaluating your spending, etc, your money will walk away from you. It’s important to check in with your budget at least once a month, to ensure everything is running smoothly and all is still in order. We have bi-weekly budget meetings in our house, to ensure bills are paid, the credit card is paid off, and all our transfers are still meeting the needs of the household.
So there you have it! We hope these simple tips help you take your budget to the next level. Until next time, keep on living the finance free life!