For many people, budgeting sounds stressful. Therefore, we often use an excuse like “I am not the kind of guy/girl who can do it”. It’s fundamentally wrong. Smart budgeting could put an end to financial stress and make your life easier. In this article, we share 10 useful tips to improve your budgeting without making life worse.
Why Budgeting is Good
Before we start, here are a few mindsets that can change your attitude to budgeting for the better:
- Budgeting means “planning”. Not “cutting costs” and “denying myself little pleasures”.
- It puts you in control of your money and helps you regain peace of mind.
- Budgeting keeps you focused on the important things and allows you to reach your goals.
Now, let’s see how we can make this process more efficient. Below are 10 tips to improve your budgeting.
Tip 1: Do It Together
If you are not a one-person household, it makes sense to do budgeting together. Thus, you can optimize your monthly spendings and avoid money conflicts. For instance, if you plan a long vacation this month, it would be fair to ask your roommate to pay most of the utility bills.
In case you are married, it makes even more sense to sit down as a family once a month and think things over. You need to be on the same page when it comes to budgeting. After all, each of you has their own dreams, ideas, and priorities that should be reconciled with your common goals.
Try to make it fun, with snacks and some sweet background music. This activity will take a couple of hours but it will make the rest of the month stress-free. Having a financial road map reduces anxiety — and saves money. Besides, it strengthens family bonds and prevents misunderstandings.
Tip 2: Consider the Differences
When planning your budget, remember that months are slightly different. For instance, in February you may spend less on eating out (because the weather is bad and you prefer to stay at home), but you should buy a Valentine’s Day gift for your partner. In May, both of your parents have their birthdays, and you should put aside some money for gifts, too. In August, you are going on vacation, meaning you can offer your apartment for rent. But half of this money will have to be spent on your dogs that will be staying in a pet hotel. And so on.
Do some forward thinking to avoid unexpected expenses. Ask yourself: “How this month is going to be different?” Put some money aside for birthdays, weddings, home renovations, dry cleaning, school supplies, summer camps, outdoor activities, and so on. Remember that even pleasant things can become stressful if you don’t adjust your budget to them.
Tip 3: Make Important Things Your First Priority
We know that it sounds too obvious, like “Wash your hands before you eat”.
But putting the most important things at the top of your list is one of the main budgeting rules. The Big Four are food for humans and pets, rent, utilities, and basic supplies. Then come transportation expenses, donations, and other indispensable or important stuff. For instance, if a member of your family has a health condition, add their pills to the list of your top priorities.
When you have prioritized the necessities, you can deal with other categories.
Tip 4: Manage Your Debts
One of the most important budgeting issues is reducing your debts. If you have ones, add them to the list of your priority expenses, too. Otherwise, the debt will be growing and eroding your hard-earned income.
The first thing to do is to evaluate your current financial situation and your debts. Do it in writing: in most cases, people tend to miscalculate their earnings, spendings, and debts when they don’t have the exact numbers. Therefore, don’t “guesstimate”. Make a spreadsheet. Hard figures will help you to be honest with yourself and take immediate action.
After that, you can start organizing your debts. Develop a plan and follow it. This plan will depend on how much you owe, and to whom. Also, some of your debts may be negotiable, and others not.
If you owe a lot, it would be wise to start with fines and smaller debts. These are easy to pay and you will feel like you are making some progress.
Tip 5: Make Some (Temporary) Cuts
If you cannot make ends meet, it’s time to get rid of the things your family does not really need. First, consider canceling the subscriptions you barely use, especially if you have a free alternative. Instead of eating out every other day, do it on weekends only. Stop visiting discount shops just because you are bored. Have a thirty-minute walk instead of taking a taxi. Speaking of taxis, some people should try using UberX instead of UberSelect.
If this part looks stressful, remind yourself that it’s not forever. Once the budget gaps are closed, you can always re-adjust your spending plan.
Tip 6: Schedule Your Shopping
To control your expenses, make a shopping schedule. For instance, you go to a supermarket on Wednesdays, and not when you feel hungry. It will save you both time and money. You will have enough time for making a smart shopping list. Also, having one receipt instead of many gives you a big picture that is easier to analyze.
Finally, such a plan allows you to stop impulse buying, typical for spontaneous shoppers, and reduce the stress caused by uncertainty.
Tip 7: Put Some Money Aside
Here we don’t talk about saving for big things. We mean making a small fund to cover the costs that are hard to foresee. In your spreadsheet, you can label it as “Other”.
This way, if something unexpected happens, you won’t have to use your credit card or make changes to your plan. You will have a budget buffer for it. To understand how big this buffer should be, track your overspendings for several months. With time, you will get better at predicting the unpredictable. Mini-emergencies include (but are not limited to) can troubles, minor health conditions, helping a friend, etc.
If this mini-emergency fund remains unused, you can always spend it for little things that make your life brighter. Or move it to the next month.
Tip 8: Find Your Perfect Budgeting Tool
Some people love spreadsheets, others prefer the good old pen-and-paper method or a special budgeting app.
We recommend you to test the third option. It makes things much easier and stress-free. You don’t even have to open your laptop, because you can do budgeting from your smartphone that is always with you.
In 2020, the list of top budgeting apps includes Mint, YNAB (You need a Budget), Wally, Simple, and some others. Each option has its pros, depending on what type of spender you are.
Tip 9: Don’t Use Other People As a Reference
When planning, consider the realities of your own life and avoid comparing yourself with others. They may seem more successful and happy, but you don’t know if it’s true or not.
Instead, focus on the things that you can afford, and there are many. When you compare your lifestyle with the lifestyle of your friends or colleagues, who all drive Porsches, it makes you choose the wrong priorities and robs you of joy.
Stay concentrated on what is best for yourself and your family.
Tip 10: Focus On Your Goals
Budgeting means organizing your spendings and channeling your money to the right place. Therefore, it’s very important to understand your short- and long-term goals. It may be buying a car or a bigger house, or early retirement, or a world tour, or education abroad, or having a child.
If you have no clear objective, take some time to think it over. You should know why you do all this, and what for.
These were 10 useful tips to improve your budgeting. We hope, you learned something you didn’t know!