5 Steps to Better Budgeting
Budgeting is a critical part of anyone’s financial health, but it’s especially important for anyone getting weekly or bi-weekly payments. When you know and track how much money is coming in and out of your accounts with effective budgeting, you can breathe a little easier! Budgeting can also save you those pesky late payment fees by prioritizing loan and debt payments. Here are five steps to help you get started with better budgeting:
Separate your needs from your wants in a budget.
This is a foundational lesson to learn for effective budgeting. Many people justify unnecessary spending because they “budgeted” for it in some miscellaneous category. However, they can easily overspend because they justify a “want” as a “need.” Ask yourself “Will spending this money get me closer to my financial goals?” and “Can I live without this?” Those questions can help you prioritize larger financial goals like saving for a downpayment or paying off debt over buying another trendy gadget from Amazon.
Budget fixed expenses separately from variable expenses.
Fixed expenses are those that never change month-to-month. They’re expenses like rent, car payments, insurance, and debt/loan payments. These fixed expenses won’t go anywhere, so they’re ones that you should budget for first. Variable expenses are things like food, gas/travel, and dining out. As the name implies, they’re expenses that are needed but fluctuate each month as to how much you spend. By budgeting fixed expenses separately from your variable expenses, you’re less likely to take away from your fixed expenses and work within the confines of your variable budget.
Practice budget management.
Some people are terrified to look at their balances or update budgeting spreadsheets because they don’t want to see how much they’ve spent for the month. Get in a habit of regularly checking your budget and accounts. Start with once a week, and check it even if you know you’ve overspent. This budget habit will make you feel more at ease with seeing the numbers and remind you that you’re in control of your finances, not the other way around.
Use a clear budgeting system that makes sense to you.
Some people love lists. Others process information in graphs or pie charts. Whatever budget display resonates most with you is the “best” one. Budgets are only as effective as the information going into them. Many budgeting tools offer both lists and graphs, and some even automatically categorize your expenses based on the transactions.
Automatically transfer monthly payments on payday.
This is also commonly called “paying yourself first.” As soon as your paycheck hits your account, pay off your biggest bills or put money toward it before you budget for other items. This ensures that you’re paying toward your financial obligations (which are often fixed expenses), and it gives you a clearer picture of what you’ve got to work with each month. Plus, automatic transfers save you the trouble of forgetting a payment, thus saving you from late payment fees.
Budgeting can feel like an exhausting chore, but it’s essential for anyone working toward financial goals. Whether you’re saving for a dream vacation or trying to get a handle on student loans, budgeting can keep you in control of your finances. At AutoPayPlus, we’ve been helping people find a better way to budget since 2003. Join the 250,000+ members who are working toward brighter financial futures by giving us a call at 800-894-5000.