Consider if you will, the concept of a budget. It’s one of those things that, like a diet or exercise regimen, is a good thing to follow, will do you a world of good, but is quite frankly a fun-murdering pain in the rear end.
The problem is, if you don’t have some kind of reasonable budget, coupled with actually following it more often than not, you will run into financial problems, if not in the short term, definitely in the long run. So, let’s bite the bullet and look at some budgeting tips that will help you maintain healthy finances.
Consider The 50/20/30 Rule
Let’s start with an actual, enforceable rule. There are financial experts out there who maintain that you should spend no more than 50 percent of your net pay on the essentials (housing, utilities, groceries, transportation), 20 percent on financial priorities (savings, retirement fund, debt paydowns), and finally, 30 percent on your lifestyle choices (entertainment, hobbies, cable, Internet, charitable contributions, etc).
In fact, for best results, your net pay should be allocated in that order, taking care of the 50 percent first, and so on. One of the cool things about this plan is that you can be flexible with the numbers, depending on whatever unique circumstances any given month gives you.
If you want a tool that can help you start budgeting this way, check out this free budget template.
Keep Your Checkbook Balanced
Granted, fewer people are writing checks these days, but they still do come into play often enough. Make sure that you keep track of your checks, including which ones haven’t cleared yet; that’s just the sort of thing that can mess up a budget and incur overdraft charges, which digs the debt hole that much deeper.
Keep An Eagle Eye On Your Bank Account
It’s amazing how easy it is to lose track of small purchases. Ten bucks here, twenty bucks there, and before you know it, that healthy bank balance is looking kind of sick by the end of the month. Most banking institutions have online access for your laptop/desktop, and mobile apps for your smart phone. Avail yourself of them at least once a week, and, like the abovementioned checks, your debit card purchases have cleared.
There’s good reason for this. Despite all of the hype about how easy it is to access your account online and see up to the minute information on your balances, some of those claims are, well, garbage. Not all debit card purchases are immediately processed. Nothing is more unsettling than checking your account balance online, seeing that it looks good, making no other purchases for 24 hours, then check it again the next day to see it gutted because a handful of credit/debit card purchases came through that hadn’t been applied to the balance yet. Like uncashed checks, these unaccounted for debits can drive your account into overdraft status. And in order to best keep an eye on this …
Save Receipts For Later Study
One common refrain after taking a balance and seeing less money in there than you expect (and let’s face it, we always find less money in our account than we expect!), is “Where has all the money gone!?” This question is often asked with much hair-pulling, fist-shaking, teeth-gnashing, and usually with a few colorful words inserted at strategic locations in the sentence. If you save your receipts and check them, say, at the end of the week, you can see where that money is going. If you collect them over the course of a month, you can get a good idea of your spending habits.
Go Old-School: Use Cash
The problem with credit/debit cards is that they make it easy for you to use them; after all, you don’t see the money physically leaving your account, do you? But if you take out spending money for the week, and you actually have the cash in your hands, it becomes a little more difficult to part with it. You find yourself asking if you really want to make the purchase in question.
Improve Your Credit Score
Are you aware that a less than stellar FICO score can result in you paying more for, say, auto insurance? Or that you may end up paying higher finance charges on loans? Do your best to drive up that score into a healthy (at least 700) range. You can do this by making sure that all of your monthly credit payments are made on time, you don’t allow your balances to go over the limit, and you don’t apply for too many sources of credit. Are you aware that every time a business checks your credit score, it’s a negative item against you? That’s because too many institutions checking your credit score implies that you’re applying for far too many credit cards/loans far too often, thereby making you a credit risk, and down goes your FICO score.
Be On The Lookout For Deals
Frequent buyer/customer loyalty clubs/discount cards are all the rage these days. It gets to the point that your keychain ends up with more mag-strip keys from restaurants and retail stores than actual keys! But the beauty of these discount programs is that they are for things you actually either want or would find useful! The savings add up, and instead of seeing your bank account diminish by getting nickel and dimed, you can actually watch your savings from these programs accumulate into something impressive.
Consider Cheaper Alternatives
Is it more cost-effective to brew your own coffee in the morning and take it to work in a travel mug than constantly stopping off for a coffee at your favorite drive-through joint? And what about beer? A 20-ounce mug of decent beer at any given establishment sets you back between three and five dollars, and that doesn’t count tipping. A six-pack of that same beer, picked up at your local supermarket or beer store, costs you between seven and nine dollars, and you get 72 ounces of beer for your trouble.
This isn’t to say that you shouldn’t go out for a few beers now and then. There’s something to be said about the ambiance, the whole idea of someone else doing the work, that is undeniably attractive. But rather than treating such an occasion as a hard-coded right to be exercised multiple times a week, look at it as a treat that you indulge only every so often.
These are just some of the many tips that you can employ in order to regain control of your budget. Check out “7 Places To Cut Corners With Your Household Budget” for more inspirations.
The best way to sum up all of this information is: Be aware of your expenditures, and show common sense and foresight.
John Terra has been a freelance writer since 1985. He believes in saving money on the necessities in order to have more freedom to enjoy luxuries.