Budgeting personal finances well are important for creating a sustainable lifestyle for yourself but can be a bit overwhelming when you’re just starting out on your own. There is simply so much to think about when it comes to money. How many credit card accounts should I have open? Do I need renter’s insurance? When it comes to finance, it is always advisable to speak with people like Gordon Simmons Former Retired CEO who are expert analysts and financial advisors in order to help you make the best decisions on the larger issues.
But, what about the day-to-day decisions? Should I put my savings in a 401(k) or Roth IRA? All of these questions can make budgeting feel like rocket science, but there are ways to make it easier on yourself, and here is some advice that might be of help regardless of your situation.
1. Keep Track Of Your Credit Score
Keeping track of your credit score means you can be proactive about preserving your credit history and making sure you always have access to the best interest rates. This is especially important if you have any credit cards, and choosing the best credit cards for fair credit is always a good idea. Being weighed down by high-interest rates can quickly drain your finances, so keeping tabs on your credit score is a good way to stay out of trouble.
If there are mistakes on your credit report, it can really affect your score and how lenders see you which can greatly impact what kind of rates you may get for future loans. Having a good credit score can also result in better insurance premiums so it always pays to be mindful of your credit.
2. Make Yearly Plans
While it’s important to keep track of your income expenses month to month, it won’t always give you a clear picture of how to manage your finances. Thinking about your money on a yearly basis is often a more effective way to budget since it allows you to see larger trends and make adjustments accordingly. For example, if you know that you’ll be spending more money during the holidays, then you can start saving now.
If you like to travel, it’s important to plan for your vacation well ahead of time so that you can avoid straining your budget during your time off. Conversely, if you know that you’re going to have a particularly low income this year, you might want to look for ways to cut back now so you don’t have as much of a problem with money once January comes. Besides that, car maintenance, home repairs, and other one-time expenses can often be better managed when you have an idea of what they’ll be ahead of time.
3. Prioritize Your Needs
One of the most important things to remember when budgeting is that you can’t always have everything that you want when you want it. This isn’t easy to accept, but it’s an important lesson to learn. Learning how to differentiate between your needs and wants is essential if you want to be successful with your finances. Needs are things like food, rent, healthcare, car maintenance, and basic clothing. You typically won’t regret spending money on your needs since you always need them.
Wants are things like shopping sprees, new cars, going out to eat, and designer clothes. These aren’t bad to spend money on per se but they can often be easy to misuse without realizing it which is why prioritizing your needs first is key. This doesn’t mean you don’t ever get to do something you like. The idea is to make sure you have your bases covered, and then see what luxuries you can get to pamper yourself after all the bills are paid.
4. Find Ways To Indulge
So now that you have your needs met, it’s time to look at your wants. Creating a budget that allows for a little bit of indulgence can be really helpful psychologically. If you deprive yourself completely, you’re more likely to blow your budget in the long run. Allowing for a small amount of spending each month on things you enjoy is a good way to stay motivated and avoid overspending.
That said, it’s also a good idea to think of ways to get what you want without spending much. If you enjoy going to dinner with friends, maybe you could have them over at your place and cook for them instead? A lot of fitness goals can be achieved without a gym membership as well.
If you like exploring new places, but don’t really have money to travel far and wide, maybe you could research nearby sites that are free or cheap for you to visit. Getting creative and thinking outside the box can help you enjoy yourself without going overboard.
5. Smart Spending
One way to make sure you’re getting the most out of your budget is to be smart about the way you spend your money. There are a lot of ways to do this, but some tips include looking for sales, only buying what you need, and avoiding impulse buys. If you’re patient and wait for the right sale, you can often get things at a fraction of the price.
Additionally, it’s more than likely that you’re spending more money on your groceries than you realize. One way to save money is by creating a meal plan for the week. Then you can make a list of everything you need and stick to it. If you avoid going to the grocery store hungry, or without a list, then you’ll be less tempted to pick up things that aren’t on your list which can end up saving you quite a bit of money in the long run.
Going for no-name brands instead of the more expensive options is another way to save, and can be just as good quality-wise. As for impulse buys, if you can learn to say no then you’ll likely spend less money in the long term.
6. Establish An Emergency Fund
One final piece of advice is to establish an emergency fund. This should be money that you’re adding to every month, ideally 10% of your paycheck, to save up for rainy days. Emergencies are often unexpected but can have a huge impact on your financial stability if you don’t have the necessary funds available. The idea behind an emergency fund is that you’re preparing for the unexpected.
It’s money that you can access if your car breaks down, or you need to go to the doctor, or you end up having to take time off work unexpectedly. As long as it isn’t frivolously spent then you should be able to get back on track relatively quickly once the emergency is over. Having an emergency fund is a great way to make sure you’re always prepared for the unexpected and can help avoid bigger financial problems down the road.
These are just a few pieces of advice that can help make budgeting easier for you. Following these tips will be pretty easy, and they will make the matter of personal finances a lot less daunting. Creating and sticking to a budget is incredibly important if you want to build a good financial foundation for yourself, and these tips will help you do just that.