3 Tips for Sticking to a Budget to Improve Your Finances
It’s no secret that most people can’t keep a good budget. And it’s often not the money that’s the problem. It’s our mindsets about the budget that’s sucking.
A budget feels restrictive. It means saying no to things we want. And it’s often something we think about when we’re already feeling low because our spending got out of control.
But a solid budget helps improve your finances. It’s a tool that gives you power over your money. And when you use it the right way, it can be one of the most freeing things you do for your financial wellbeing.
Before creating a budget you need to be clear on what you want to achieve with your money. Start with making lists of your:
- current needs and wants – necessary living expenses, self-care, travel, fun money, etc.
- financial goals – short-term (saving for a car, getting out of debt, etc.) and long-term (retirement)
Once you have clarity on why you want to improve your finances, you can start building a budget that doesn’t suck.
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3 Tips for Better Budgeting
Here are three tips to help you stick to your budget and increase your financial net worth:
1. Create a savings and spending plan that doesn’t suck.
This may seem like an obvious one, but you’d be surprised how many people try to keep a budget that doesn’t reflect their actual spending. They then view the budget as restricting and punitive.
And when a budget is too restrictive, we’re more likely to give up on it altogether. But if you build in room for fun money, you’re more likely to stay on track with it.
Ensure your budget actually reflects your spending and makes saving money a priority.
Allocate at least 20% of your income to saving and investing, and then spend the remaining as you see fit. Your spending plan should be realistic, so you can stick to it without feeling deprived.
Think about your spending patterns and create categories that make sense for you. For example, if you know you spend a lot on coffee every month, include a line item for that in your budget.
And don’t forget to include those expenses that don’t incur every month, like car registration and insurance, or gifts for birthdays and holidays. When you have a plan for these things, they won’t feel like such a budget-buster when they come up.
Read, Track Your Spending, Improve Your Finances, if you’re not sure where your money is currently going.
2. Don’t stress about it.
Remember, a budget is just a tool to help you with your finances. It doesn’t have to be perfect.
Budgeting for 100% of your money is a good practice. It might even be a best practice.
But if the idea of maintaining a basic budget and tracking everything is keeping you from creating a detailed budget, then what’s the point?
Still, you need to create your budget at least once so you know how much money you have coming in and going out (most people don’t even know this much).
But, if you’re not naturally inclined to budget, then the stress of monitoring a budget on a daily or monthly basis will only make you miserable. If it makes you miserable, you’ll stop doing it.
When you already know you’ll struggle to track and manage your monthly budget, then don’t worry yourself about it.
If you dedicate 20% of your income towards debt reduction, retirement, and savings, then you do not need to track the remaining 80% of your budget.
And if your income is fairly static, you may never need to create another budget (unless there are major changes in your income or expenses).
The only bare minimum budget you need to know is: save at least 20% — 10% for retirement, 5% for emergencies, and 5% for debt. If you have emergencies covered and debt paid off? Put a total of 20% towards your retirement.
Read: Are You Overthinking Financial Decisions?
3. Automate as much as possible.
Putting as much of your finances on auto-pilot as possible will make managing your money less stressful.
Set up automatic transfers to your savings and investment accounts. Get e-bills delivered to your banking system if possible and set up any bills you can on auto-pay so you’re never late on a payment.
Use a budgeting app such as Mint, Qube Money, or Tiller to monitor your spending and give you a clear picture of where your money is going each month.
Or use Personal Capital to not only track your spending, but also your savings, investing, net worth, and retirement planning.
When you have a system in place that requires very little effort on your part, you’re more likely to stick with it. And the less time you have to spend managing your money, the better.
Read: 9 Great Money Apps to Help You Achieve Financial Goals
Budget for You, not perfection
Creating a savings and spending plan that doesn’t suck, automating as much as possible, and then not striving for budgeting perfection, will help you stay on track, achieve your financial goals, and build wealth.
There you have it! So what are you waiting for? Get started today!
Have any budget tricks that help you stick to your budget? Apps? Other? Please share in the comments below!