Beginning a budget can make daily life more stressful. The math alone can be enough to put most people off — but it’s not so bad if you have a strategy. It is never too late to take financial control of your life. Whether you’re embarking on your first budget or revamping one, here are six tips to help you master your finances this year.
1. Use a Debit Card to Live Within Your Means
Never before have people had so much access to external funds such as credit cards and personal loans. With this ease of access comes the challenge of not spending what you don’t earn. Living on a budget means setting boundaries for your spending — something credit cards don’t help with.
Ultimately, debit cards are the best payment method to rely on. You can’t spend more than you have in your bank account, and they allow you to see your transactions as they happen. This provides a clear understanding of what you spend without worrying about what you’ll owe afterward.
You can make budgeting easier by finding a debit card that offers benefits such as round-up saving or cash-back rewards. It can help you save money automatically alongside the budgeting work you’re already doing.
2. Set Aside Money for Necessities and Savings First
When making your budget, be sure to create categories for necessary payments at the start. Assign that money before creating any other categories. Bills (particularly those that affect credit) should come before anything else, and then you can work with what remains.
Examples of necessary payments include rent, utilities, groceries, and insurance. Once you’ve got a roof over your head, lights on, food available, and healthcare coverage, allot some of your income for savings. In addition to any round-up saving you might be doing, direct a percentage of each paycheck to your savings account. Financial experts call this practice “paying yourself first.”
If your rent is high or you have to pay for your own health insurance, this may leave you with little disposable income. But don’t worry. Working a side hustle for a few hours a week or eliminating some underused subscriptions will provide funds for the occasional splurge.
3. Be Realistic When Assigning Funds
One scary part of budgeting is looking at your past activity and adding up the transactions for each category. You might find that you spent too much dining out and decide not to eat out at all next month. This helps your budget, but is not very realistic. It’s quite unnecessary to give up something enjoyable cold turkey.
Try tapering down each month instead; you’re only beginning, and you deserve leeway as you train your habits. If you spent $200 dining out last month, instead of assigning $0 to that category, give yourself $175. Then as the months go by, you can decrease that amount and gauge how much you want to continue allocating for it.
4. If Using a Spreadsheet, Start With a Template
Beginning a spreadsheet (if it’s your chosen budget-tracking method) means tackling heaps of mathematical inputs. Although you could automate these calculations, there is an easier way.
Instead of starting from scratch, look for a spreadsheet template online created by someone else. One person’s work can cut down yours considerably. A well-designed spreadsheet will only require you to input your own numbers.
Many spreadsheet platforms provide the ability to use premade or custom templates that you can find online. This can cut down your budgeting time by hours and make it easier long-term.
5. Use a Highly Rated Budgeting Platform
Many people who are starting a budget benefit from external direction and support. This is most readily available through online budgeting services that, like more specialized spreadsheet templates, do the work for you.
The downside is that these platforms often charge for access. If you’re in a tight financial situation, the additional cost can be off-putting. But for many, the pros outweigh the cons, and the cost can be factored into your budget.
This option is particularly convenient because of how much of the work they do for you (e.g., importing bank transactions). An annual fee is worth it if you use the platform to its full extent. If it helps you stick with your budgeting, you may not even notice you’re paying for the platform.
6. Keep Track of Credit Card Usage
The more control you have over funds entering and exiting your accounts, the better your financial health. The nature of credit cards (much like loans) means that you can spend money regardless of whether you have it. Even a one-time mistake can cause burdensome debt.
Ensure that you’re only using credit cards to pay for things you can afford. Assign your credit card to certain purchases in your budget, such as rent, so you can always keep track of it.
As long as you use and pay off your card responsibly, it can considerably benefit your credit score over time. Just remember to follow the boundaries of your bank account and budget when doing so.
Getting started on a budget is the hardest part of this process. No one wants to look at their transaction history and identify where they need to cut spending. But by following these tips, creating a budget can be a straightforward, painless process. With the right mindset and tools, you’ll find that creating — and sticking to — a budget will come naturally.