They say an ounce of prevention is worth a pound of cure. What they don’t tell you is that the “simple task” can often be perceived as the most difficult. The “simple task” on the docket today…. a budget.
Now, before you click the “x” in the upper right-hand corner of your screen, as you would an advertisement for car insurance, give the next few paragraphs a chance. You might find a useful nugget or two to make your life a little easier. It is not the task of budgeting that is difficult, but being honest with yourself AND holding yourself accountable can be difficult. In this blog, you will find some helpful and realistic hints that may make your financial life a bit easier to navigate.
We tend to make budgeting out to be this task that weighs us down, holds us back, and nags at us like a sore muscle. However, it is really a simple task intended to make our future-selves thank our past-selves. So the question is, how do you make your future-self thank you, without draining more time and resources than your present-self needs to?
Thanks to the many apps for your cell phone (and any other device), along with some honest pre-work, a budget can be a fairly easy thing to get started.
Step 1: Take a look at what you bring home, and what you have to pay.
This is the scary part for many. It can be intimidating to look at how/where we spend our money. However, in order to have a starting point, this has to be done. The key is not to make it harder than it has to be. Start with the income that you have, after taxes, for a one month period. Then gather up ALL of your bills and start calculating. This is designed to be a guide so do not dive too deep here. According to studentaid.gov, you should overestimate your expenses and underestimate your income.
Step 2: Determining needs and wants
The purpose of this is to look ahead. Sure, that beach trip you want to take sounds fun but is it feasible? If it really is, you can create a monthly saving plan to get you there. On the other side of that coin, we need our utilities and healthcare maintenance items. Healthcare maintenance items could still require planning, but are definitely a need. This step can also begin to determine if some of your expenses are as important to you as you thought they were. Sure, you wanted to see the final season of “Game of Thrones,” but do you still need the monthly expense of the premium app/channel on your television?
Step 3: Create your monthly budget
Believe it or not, you are almost done! You are aware of your income and expenses, you have determined what the must haves are, and what you would like to have. Now put all of that together into a monthly plan that you are comfortable with following.
Step 4: Get an App to help you keep track
All you need is your cell phone! Some apps are better than others, but they all have the ability to give you some idea of where your money is going. Find common ones in the app store, and seek out the ratings and reviews. Try a couple on your own and see what works for you!
Step 5: Live it out for a couple of months
Up until now, this is all pencil and paper, and an app…simple ideas. Take a month or two and put those ideas to practice to make sure that what you expected to happen is ACTUALLY happening. Revisit the budget to see if it is holding up to the expectations. Most importantly, don’t be surprised if it didn’t quite work out like you thought. Adjust it with any changes in income and expenses, re-evaluating needs and wants along the way. Also, look to see if you saved any money through your plan. Did skipping the fancy coffee on Tuesday translate into more money…or did it get spent on something else. These little items can make a big difference!
Step 6: Now that you have this short-term stuff down, take a crack at a longer term goal.
Once your budget has become a habit, and you are committed to it, you may be surprised to find spare change laying around. This is the moment that you can begin looking at your wants list and create a goal for yourself. Still regretting not taking the trip to the beach? How long would you have to save up the extra money you have saved via your budget? Want to build up a savings account? Build a long-term plan that makes sense in your budget, and stick to it. Pay yourself like any other bill. Who knows, you may surprise yourself.
If you have made it this far, we hope that you have learned something. Even if it is just that those side effects are a little easier to avoid than you thought!