5 Basic Budgeting Tips You Need To Get Your Finances On Track
I’ve helped tons of friends get their budgets together and help strategize a plan to help pay off their credit card debts. I’m not a millionaire but I know how to budget my money. Maybe that’s why I’m not a millionaire...yet. Here are 5 basic budgeting tips to help get you on the right track when it comes to feeling financially secure.
Create an Expense Report
Treat yourself like a company. Just for a few months. This will help you see what you’re actually spending and what categories you might be overspending on. Spoiler alert: It’s probably coffee. There are templates online that can help get you started.
When I was in college, my dad made me do this. Made you? Yeah. If I wanted him to send me some money every month, he made me fill out an expense report and I’d get reimbursed for certain things. I hated it then. I’m am so grateful for it now. I recognize this was a privilege. As annoying as I thought it was, it helped shape my spending habits.
Determine Your Spending Buckets
What are you spending your money on? You can often find these categories in your bank account or credit card budgeting sections. Did you know they already do that for you? Taking a look around your bank account services or expanding your credit card reports can help you determine categories.
This doesn’t mean use these, it just means it’s a way for you to start determining your own so that you don’t start on a blank slate. Categories can be things like Food, Travel, Car…the list goes on. Here are some of my top spending buckets on my budget:
- Streaming (Netflix, Disney +, Spotify, etc.)
- Jude (my dog)
- Car (this can be gas or car payments if you have them)
- Adulting (this is my emergency or aw shit I gotta take care of that category)
- Fun (this can be going out or concerts)
Using your categories, create your own budget. How much do you know you’ll have to spend a month on things like bills or rent? What’s left can be used to budget the fun categories and savings. You might not have much left but at least you get to decide where the rest of your money will go.
Adjust Your Budget Monthly
You have your budget categories set up. Great! You might not use them all every month and that’s okay. One month you might need to go to the doctor and pay a $40 co-pay. If you plan your budget out by month and adjust your budget estimates beforehand, you will be able to balance it out and know what to plan and prioritize for that month. Move money from the fun category. I know, adulting sucks.
I’ll admit that some months I’m totally focused and plan this out. Other months, I completely forget about it. If you’re just starting out, the best way to keep to your monthly budget is to track everything you spend. After you buy something, put it in the budget as a line item. You can use your expense report for this as well. The budget can live in the same document or in a different tab. Find what works best for you.
There are two forms of debt: Short-Term and Long Term. You’re always going to have short term debt, especially if you have credit cards. Credit cards aren’t bad if you know how to use them. You should be treating your credit cards as if they were your checking account. Don’t ever put more on them than what you have.
The best way to tackle your short-term debt is to pay the balance off every month. If you’re paying only the minimum, you’re stacking the odds against you. If you’re in a pickle and have to pay the minimum, that’s fine. You’re getting yourself back on track. Stop charging things to the card and just pay the debt off before you charge anything else on it.
Long-term debt can be your car or student loans. These are things that should be treated as rent. Pay a monthly amount. Stop deferring if you can. It’s better to pay something. The system is stacked against you. I know. Take this advice with a grain of salt if you’re doing the best you can right now. What can you pay now? Start there.
Open a High-Yield Savings Account
Always put a sum amount of money away. This can be anything from $10 a month or $500 a month. If you don’t think $10 is enough, think about it this way: if you save $10 every month, you’ll have $120 at the end of the year. That’s more money than you had before. That’s a start.
A high-yield savings account basically makes money for you. The higher the interest rate, the more money you’ll have at the end of the year. This doesn’t mean you’re gonna make like $2,000. Realistically, it’ll be more like $100. But guess what? That’s more money than you had before and you didn’t have to do anything to earn it. Well, technically you did…you saved!
These are just the basics
There’s so much more to getting your finances on track. There are tons of resources out there that can help. The best thing you can do today that won’t cost you anything is to see where your money is going. Track your spending and from that spending, make your budget. You’ll identify where you’re overspending. If you still want to keep buying that coffee every day, maybe it’s time to start that side hustle or get another job to increase your cash flow.
After you’ve gotten a grasp on what your spending on and set up a budget to watch that spending, focus on tackling that debt and building up a savings account. It might all seem overwhelming but if you take it one step at a time, you’ll be able to see and feel the difference. Setting yourself up for success within your finances is another step towards a lovely life worth living.