One of the hallmarks of becoming a mature, fully-realized adult is the ability to manage your money with some degree of success. It’s unfortunate that more time is not spent in schools on teaching young people how to manage their money, because it is the one skill that can change the entire trajectory of your life.
More than any other money management skill, you need to know how to put yourself on, and successfully follow, a budget. Your budget will set the tone for your entire money management philosophy. It’s not enough to just say “I’ll spend less”. You need to make a concrete plan to give yourself the best chance of succeeding.
Here are the top 5 ways to stick to a budget.
Meticulously Monitor Your Expenses
The first step to creating and sticking to a budget is to become fully aware of where every single one of your dollars (and cents) are going. This requires time and energy, but the benefits of this awareness will pay off in a big way in the end.
A lot of people do not realize that small expenses add up quickly over the long term. By tracking your expenses you get to see how your small decisions affect your overall finances at the end of the month. Knowledge is power, and with this knowledge you can realize that a daily Starbucks visit is actually costing you a hundred bucks a month.
Use a budgeting app on your smartphone such as Mint, Wally, Billguard, Spendbook and YNAB (You Need A Budget). Each of these apps is similar in that you input your expenses and it shows you historical graphs so you can track your progress as the months go on. By categorizing your expenses you will see the running total of where your money is going. The results may surprise you.
Make A List Of All Your Bills
When you start creating your budget the items that go first are the necessities, such as your food, your rent and utility bills. You will need to tailor your budget around these bills. Your money needs to be allocated to get these paid first.
You can reduce expenses in a lot of ways, and that includes your monthly utility bills. Some bills cannot be easily reduced, such as your mortgage/rent or car payment. But most other bills can be. Do you subscribe to extra channels on your cable TV package? Are you paying for 50 mbps internet speed when 10 mbps is acceptable? Do you have appliances which are electricity hogs? Take a good look at what you can cut and still maintain a similar quality of life.
Decide Before You Spend Your Money
When you get paid you need to decide how you are going to spend that money before you spend any of it. That is the most important factor in keeping to a budget. A lot of people practice reactive money management; they spend the money first and decide to reduce spending later.
Instead, you want to practice active money management. Take your paycheck and write down (or use the apps mentioned earlier) where each dollar will be spent before you spend it. If it’s not in the budget – you can’t buy it.
Think About Those Unsuspected Expenses
Think about the expenses that pop up, surprise you, and throw off your budget. These are things like automobile expenses, taxes and medical bills. But if unexpected expenses happen every month, are they really unexpected?
Start setting aside money for these so-called surprise expenses now so that when they come up you will already have “paid” them, essentially. This will greatly reduce your stress when these kinds of events happen.
If you go through a month without these miscellaneous expenses occurring, then great! You are free to spend that money (and only that money) on anything you wish.
Hold Yourself Accountable
If you want to stick to a budget you need to hold yourself accountable. This is your money, your life, your future. Be steadfast in your pursuit of financial security and freedom. If you go over budget in one way, that means you need to give up some money in another way. After all, you’re the one who created the budget, so hold yourself accountable if you blow it. This will keep you accountable.