Financial independence can sometimes mean one thing, and that is sticking to your budget. Sometimes this can be hard for anyone, especially during these times.
However, you need to stop wasting your money on unnecessary expenses like that coffee from Starbucks you drink every morning. It is not essential, and it may even be ruining your budget.
We get it, it's hard; not everyone has top-notch financial know-how and discipline. Sometimes, despite the steps you take, you still end up over your budget.
In the end, it feels as though something is missing — something that could push you and your budgeting to the next level.
Well, look no further, as this is the perfect read for someone in your predicament!
Here are the best tips that can make you into a budgeting professional.
1. Create a Budget
A schedule will always be beneficial for anyone since this tracks all your income and spending for a given period.
We know this sounds basic, but there may be some steps you skipped or missed along the way.
Sometimes it's just a matter of modifying it to suit your personality and needs. Do what works for you, and try not to copy everything you see in other people's progress.
Step 1: Identify Your Income
The key here is to identify your net income. This means you have to deduct all the costs you normally have to pay, such as:
- Taxes
- Security
- Insurance
If you have other side hustles that can contribute to your budget, it would be best to include that as well. This step will determine the amount of money you can work with after deducting all your fixed expenses.
Step 2: List Down Your Expenses
Write everything down to each cent you used.
Don't just write them down randomly in a list. Organize them so you can look at them clearly once you're done.
We suggest you start with the monthly expenses that you always have to spend on. These can range from your electricity bills to your rent.
Since these are the expenses that will most likely be there forever, you won't be able to cut them out.
Follow up that list with the other costs such as:
- Groceries
- Credit card
- Monthly subscription to a streaming site
This is the list where you can reduce your expenses or eliminate them.
Step 3: Set Your Goals
Now that you have your list, let's make some goals. This will provide motivation and focus, so you won't cut things off the budget unnecessarily.
You can make long-term goals immediately; that's easy to do. What's difficult is maintaining short-term goals that will eventually lead to your main goal.
When making your long-term and short-term goals, do not expect to achieve the long-term goals within a few months. There will be a process that involves adapting and adjusting to the new lifestyle.
These goals do not have to be something you stick to no matter what. You can adjust it based on what is happening in your life.
You might need surgery or travel back home; adjust it with that in mind. Sometimes goals are set based on the limits you allow yourself to have.
In the end, the goal-setting process will do what it is intended to — showing you what you should be prioritizing in the long run.
Step 4: Plan
Now, all that is left for you to do is make a plan or budget. With all the information you have, it will be easier for you to save money and stick to the budget.
The plan should always be based on your needs. Go through your daily routine and pick out the essentials.
This means the items you need to spend money on versus the ones that you can manage. However, you can also manage some essential expenses.
As we said, you can adjust the fixed expenses in some sense. You can do this by reducing your electricity bill or looking for a better, more cost-effective apartment.
Something that could be closer to work would be nice, or simply something cheaper. If you drive to work, this will cut down your gasoline budget.
However, it's best to start by not allowing yourself to get that extra cup of coffee or by avoiding eating out too often. Making your coffee and food at home is a great place to start with.
While you might end up canceling your monthly subscriptions, consider the effects as well. If you use it as a stress-reliever at the end of the day, it might be worth the cost.
2. Automate Your Savings Deduction
Another way to stick to having a good financial standing is to save as much as you can. Part of your budget should be your savings.
If you find it hard to save when you receive your pay, opt for an automatic savings deduction.
However, do not do this if you are already constrained to a budget. Meaning, you don't have extra room for savings, for now at least.
So follow the previous steps and make sure your budget has opened up with extra cash before even considering this. If you do have the budget, this can help you save for the future.
When it's automatically deducted from your account, you might not even notice. This will help you achieve your long-term goals.
You could also set it up for your short-term goals, like a trip to Disney World. When you automatically deduct, you can save a budget for your short-term goals.
Just think of it as one of your essential monthly costs, like your electric bill. It will be part of your fixed expenses budget.
Some studies showed that only 25% of Americans own savings and emergency funds. You don't want your family to be part of that statistic.
This means you will not have excess money to spend on an emergency or future expenses.
Utilizing an automatic system will help you avoid sticking to your budget for your savings when you do it manually.
We all know the moment you take that money out of the bank, there is a good chance you won't put it in your savings. This way, there is no money to pull out since it's in a different savings account, and it automatically happens on the day you receive your pay.
In a few months, you won't even remember you had it set up. Your future self is going to thank you for the extra thousands you have in the bank.
3. Avoid the Spending Triggers
Everybody has their version of spending triggers, and that does not exclude us financial coaches. These spending triggers have deeply penetrated our mental state, and they often occur without us seeing them coming.
You have those times when you feel the strong urge to buy something, not because it’s extremely important, but just because you want it. Spending triggers can happen without you knowing why it happened.
Identify those triggers
The first thing that you should do to conquer these spending triggers is to identify them. It would be helpful to take time to identify your spending triggers, so you can establish a plan to stop them from occurring.
The plan should be compelling enough that it can make you stop and evaluate things before you click that buy button in the shopping cart or before you use your debit card to buy that luxurious gadget.
But before you assess your spending triggers, let us first understand what these triggers are and what makes them exist.
Understanding Spending Triggers
Spending triggers indulge emotions that urge you to spend. They are solid temptations, and one has to be disciplined to really resist them.
You will be surprised at how spending can trigger your subconscious to spend the money that was supposed to be allocated for something important. This will just intensify your current emotion, regardless if it is good or bad.
These are commonly known as spur-of-the-moment emotions.
Overcoming Spending Triggers
To help overcome your spending triggers, you need to learn to embrace and recognize your emotions. Rather than spending your hard-earned money to make yourself feel better, you can refer to your friends and get a healthy conversation.
You could also:
- Watch your favorite movies,
- Read books,
- Initiate a simple project
- Do a simple workout
These activities can work to produce similar pleasant brain chemicals to when you go shopping.
Do alternative activities that will not get you into financial trouble. Find other exciting recreations that could consume your time and, at the same time, make your dull moments lighter.
It is also best to define a limit for your shopping and stick to it. It will be very tempting if you get more than one credit card.
Get one credit card and intend it for emergency uses only. Leave it in a safe place, so you will not be tempted to buy more than you intended.
4. Consider Spending Less Than What You Make
You can master a prudent way of living by spending less. You see, many rich people spend less than what they make — so should you.
Learn to make minor adjustments by differentiating your needs and wants. By doing so, you can establish a financially helpful habit.
Identifying your wants and needs is already done in the first two sections. You just have to go and see your needs so you can stop spending on non-essential items.
5. Join a Credit Union
You may have reached that joyful moment of earning enough money, regardless if that’s through tangible assets or liquid investments. On the other hand, maybe you are still finding it hard to keep your finances stable.
Wherever you are on your journey to financial freedom, joining a credit union may help you further. We have the same goal: to have financial freedom.
Joining a community with the same goal will encourage you to implement your plans better.
The Key Takeaway
Creating a budget and sticking to it is hard and will take some time. To do it right, you have to know your income and expenses. List them down so you can easily identify your non-essential expenses.
With your plan, you should also avoid the spending triggers that let you shop for non-essential items. By doing this, you can live below your means.
Moreover, you can easily reach your goal if you join a credit union. With a community that aims to help you throughout your financial journey, we can help you stick to your budget.