A budget is a tool that helps people plan their monthly income and expenses. Creating a defined budget and sticking to it can help alleviate financial stress and provide security; all it takes is discipline, planning, and prioritization. Sticking to a budget doesn’t have to be scary. Although it may seem overwhelming at first, the result will certainly be worth it. Follow these 14 tips to help you stick to your budget and avoid overspending.
You cannot build a budget or set the right amount for each category if you don’t understand how and where you spend your money. Print out your bank statements for the last three to four months and analyze your spending habits.
Break down each expense into different categories, such as fixed and variable expenses. Fixed expenses are costs that don’t change from month to month, such as rent, mortgage, and insurance. Variable expenses vary from month to month, such as groceries and entertainment costs. This will help you understand your spending patterns and assess how much you spend every month and what you need to change.
If you struggle to create a budget and stick to it, then you should try to understand what triggers you to overspend. Stress, boredom, and social pressure often contribute to overspending. Once you get to the bottom of it, it may help you control the urge. Consider keeping a spending diary and recording each of your shopping trips to detect a pattern.
Don’t follow a budgeting method that doesn’t fit into your lifestyle. To find one that works for you long-term, you will have to experiment with a few different approaches. There are many ways to budget, but most people use the following methods:
Ask someone you trust to help you make a budget and stick to it. Having someone else keep you accountable, motivated, and focused can help you stay on track. Share your budget along with your long-term and short-term goals with your accountability partner and let them review your progress and give you critical feedback.
Credit cards are very attractive and convenient. Sometimes, it may be hard to resist the temptation of charging purchases to credit. However, the ease of credit cards can often contribute to overspending. Unless you are confident that you can pay your credit card bill on time, avoid reaching for plastic. Otherwise, commit to cash, use a debit card, or deactivate your credit cards. This can help you avoid the debt cycle resulting from high credit card fees.
If you are an online shopper, remove your credit card information from your shopping profile. This will make it slightly less convenient to make purchases. If you know your digits by heart, consider canceling your current card and requesting a new one.
Don’t assume all your monthly expenses will be the same. Before starting every month, set a different budget while considering that month’s one-off expenses. There are bound to be a few purchases that go outside the scope of your pre-determined categories, such as birthday presents.
That’s why make sure to set a different budget every month to plan for one-time or unexpected expenses, so you don’t fall behind from your budgeting goals. It is also highly recommended to account for emergency savings and incorporate it into your budget.
If you are an impulse shopper, start shopping with a list to help you stick to your budget and avoid overspending. A shopping list will tell you what to spend money on, help save time, and make you feel good about yourself when you successfully stick to buying the items on your list.
Monitor how much you are spending compared to what you have budgeted for; this will help you stay on track with your budget. Failing to do so may cause confusion as to where your money has gone, which may also lead you to go over your budget. You can track your spending in a spending journal, budgeting app, or spreadsheet.
Moreover, once the month concludes, you can go over all your spending and see what areas need to be adjusted in your budget. This will help you detect categories that need to be added to your budget that you may have forgotten about.
Knowing how much money you make will help you understand what you need to base your budget around. If you are an employee working one job, you already know your income after tax. However, if you have multiple sources of income or are self-employed, it might be challenging to stick to your budget when your monthly income fluctuates. Therefore, it is best to create a budget around a minimum monthly income – if you happen to make more, consider saving or investing it.
Cutting your expenses and resisting impulse purchases may not always be effective if you are not investing in your savings account. Set up an automatic savings program to transfer a portion of your monthly paycheck directly to your account.
Categorize your spending to have a complete picture of where your money is going. If you are using an app to track your spending, it will automatically categorize your expenses. However, if you are tracking manually, you need to determine your own categories to understand how much you are spending in different areas of your life. You could then assess which aspects you are overspending on and take the necessary actions. For example, the essential budget categories are housing, transportation, food, utilities, personal spending, saving, investing, and debt payments.
Keep close track of your goals and the progress you are making; otherwise, it may be challenging to stay on budget if you forget your goals and motivations. The key to smart spending is to align your day-to-day actions with your financial goals to help you stick to your budget. Develop a financial goal chart to stay on track. Write down all your goals and make sure they are SMART: specific, measurable, action-oriented, realistic, and timely. Then determine how much money you need to reach your short-term, mid-term, and long-term goals and monitor your progress.
The next time you are faced with the temptation to make a purchase, sleep on it before buying. Resisting the temptation of making an impulse purchase will help you reflect on the matter and understand whether it will harm your budget. For example, if you see a nice pair of sunglasses, sleep on it and think hard whether you really need an extra pair of glasses or not. Of course, the longer you can wait on your purchases, the better. After a couple of days, if you have already forgotten about the product, that’s a good indicator that you didn’t need it anyway.
Think about how many hours of work it would take to afford the purchase you are considering. Then, when you put the numbers into perspective, it might help you reconsider whether it is worth making that purchase. For example, if you want new jeans that cost $200 and you get paid $20 per hour, consider whether that pair is worth 10 hours of labor.
Sticking to a budget may take some time and effort. However, finding a suitable budgeting method, tracking your expenses, and remembering your goals can help you in the process. Budgeting can significantly enhance your financial stability and help you maintain a debt-free lifestyle.