It can be hard to stick to a budget, especially if you’re new to the whole process. Last month, we posted 10 Easy Saving Tips For Beginners, but setting a realistic budget can be harder than it seems. There are plenty of ways to go about creating a budget; however the key is to set realistic goals and spending caps so you can be successful and grow your savings.
Here are 7 tips that are guaranteed to help you set a realistic budget that you can maintain long-term.
1. Know Where You Stand
The first thing you need to do is figure out where you stand, financially. Know your exact account balance, know how much you owe to credit cards and other loans, know your take home pay after taxes, and know your spending habits. The easiest way to accurately check your spending habits is to look at receipts from the last month or two, or track your spending over the next full month.
Once you have these numbers figured out, you can begin a realistic plan based on true numbers, rather than estimations or averages. This will make it much easier to stay under budget.
2. Make Financial Goals
Knowing why you’re budgeting can be the motivation you need to stay within your limits! Having a specific long-term goal, such as saving for debt freedom, a vacation, a new car, or even just to have money in the bank is beneficial. Even a short-term goal, like setting a weekly groceries budget, is better than not having any goals at all. This way, you still have the freedom to splurge on day-to-day treats, if you stay within your limit. Once you make a goal, hold yourself accountable. Knowing your efforts are going towards something tangible will make the whole process much more gratifying!
3. Start Small
One easy way to quickly break your budget is to create unrealistic goals. Set small, attainable goals at first, giving yourself a chance to get into the habit of saving without drastically changing your life. Cutting 20% off your entertainment (i.e. trips to the movies, or drinks with friends after work) is a lot easier than cutting your total spending in half right off the bat. Gradually adjust your goals as you get better at cutting costs, and your budget will be much more effective in the long run.
4. Use Your Resources
In our technological world, there are tons of electronic resources to help you keep track of your money. Download a budgeting app, such as Mint, Level Money, or Goodbudget, to your phone or desktop. Budgeting apps sync to your bank account and let you know exactly what you spent and in what category. This way, you see how much you spend on groceries, bills, and other expenses. Some apps even organize this information into easy-to-read pie charts for you!
Another resource is your current bank. Talk to a financial advisor, or simply set up automatic transfers into a savings account (preferably one that has at least 2 or 3 percent interest). Auto-transfers can be done monthly, weekly, per paycheck – however you can afford to do so. This way, you’re saving without thinking about it or being tempted to spend.
5. Regularly Review Your Budget
This might seem like a no-brainer, but in order to stay on budget, you need to review your budget periodically. Check that your spending habits are aligning with your plans and fix any leaks. If you’re constantly over-spending on groceries, but under-spending on credit card payments, then adjust your limits accordingly. There’s no shame in going back and changing something that isn’t working, so don’t be afraid to tweak your plans.
6. Have a Support System
Surrounding yourself with people who actively over-spend will negatively influence your budgeting and may even cause you to abandon your budgeting plans. Having at least one person who is on board with your plan makes the process much easier. Turn to your parents, siblings, significant other, or financially responsible friends for help or support.
7. Go Easy on Yourself
Going easy on yourself goes hand-in-hand with setting small goals, because as mentioned above, setting small spending caps is a much easier habit to get into than slashing your entire budget from the get-go. Cutting hard and fast almost always leads to failure. Treat yourself every once in a while as a reward for coming under budget. Once you find the perfect budgeting plan, you may want to set aside another budget for frivolous things, like concert tickets, weekend getaways, or drinks with friends after work, as a way of rewarding your efforts!
Remember, budgeting doesn’t have to be a daunting task! Start wherever you feel comfortable and go from there. It’s all about saving little bits over time, and working toward a goal that’s right for you.
If you need a little help for an unexpected cost that your budget doesn’t cover, Magical Credit offers cash loans to people currently receiving government income such as unemployment, maternity leave, or pension. Check here for a more complete list of incomes that we accept, or fill out our loan application.