For most consumers, creating a budget is the easy part — it’s actually adhering to it that can present the hard-to-overcome challenges. But with a few tried-and-true budgeting tactics accompanied by a healthy dose of self-discipline, most of us can take big strides toward making our spending/savings plan a reality and accomplishing our financial goals.
Why create a budget?
Creating your budget will give you a solid idea of how much money you have coming in, along with how much of it will need to be used for paying bills and funding other expenditures. And by doing this, you’ll give yourself a road map that can be a huge help in realizing your financial goals, whether they are to save up for that better car or to make the home purchase or improvements you’ve been dreaming about. Other goals might be to start and grow the college fund you’ve been planning to build, or to consciously set aside the funds needed to cover whatever future expense you’ve got in mind.
10 tactics for budget success
Of course, for your budgeting efforts to be effective and actually deliver the savings needed, you’ve got to stay on course. Whenever you’re ready to put your savings plan into action, consider these 10 helpful budgeting tips to sticking to your budget:
- Make sure the effort is mutual — For those who are married or otherwise share finances with a significant other, the first step toward budgeting success is to ensure that all parties involved are on the same page. During the budgeting process, sit down together and discuss your finances, your goals and how much you each feel should be budgeted for your discretionary spending. Once you’ve reached an agreement and put your plan into action, check in together each week to see how you’re doing and how you can improve. If everyone is working together to achieve mutual goals, you’ll be in a much better position to succeed.
- Monitor and scrutinize your non-essential spending — As mentioned above, you’ll definitely want to give yourself an allowance for discretionary/non-vital spending — but you certainly don’t have to spend all the money in the discretionary-spending budget. If there is extra left over at the end of the month, allot it to the goals you’re saving up for. And keep a close eye on where you’re spending these discretionary funds to see if you can trim back such expenditures to devote more money to savings. Even adding small amounts to your savings by limiting your spending on luxuries can make a significant difference, especially if you continue to do so over time.
- Kick the bad habits — One prime way to cut your discretionary spending is to break away from any bad habits such as smoking or drinking, especially considering how expensive alcohol and tobacco can be. Not only will doing this help you build up your savings, but it will also help support a healthier lifestyle! And in the long run, it can also help eliminate pricey health care expenses and lower your health insurance costs.
- … And tamp down your triggers — Most of us have at least one admitted weakness when it comes to discretionary spending. For some, it may be shoes or other apparel items that we find it hard to avoid splurging on. For others, it might be music, sporting events or daily visits to the coffee shop. Whatever your spending triggers may be, be honest with yourself to identify them — then challenge yourself to gain better control of them. Start with limiting spending on your trigger for a single paycheck, then stretch the commitment to longer periods of time. After a while, you can turn the reduced spending into a habit … and feel the satisfaction that comes with putting the extra money toward your goals.
- Share your plans, and learn to say “no” — It can be tough to talk about your financial constraints. But especially when you do so among close friends and loved ones, most people understand when you have to live on a budget. Letting the important people in your life know about your financial goals and how you’re working toward them can also make it easier to stick to your budget. And learning to say no when a proposed activity or expense simply isn’t critical and doesn’t fit into the budget is a must for achieving your goals.
- Start a savings account — If you don’t have one already, a savings account is a great place to keep the funds you’ve been working so hard to save. (And even if you do already have a savings account, opening a separate one specifically for the expense you’re saving for can also help you reach your savings goals.) By moving funds into your savings account from the account you put your paychecks into and use for everyday expenses — a checking account for most consumers — you can effectively take it off the table for spending. And by employing an “out of sight, out of mind” tactic with your main spending account, you can more easily control your spending and set more money aside.
- … And leverage automatic transfers — To make the most out of the “out of sight, out of mind” tactic mentioned above, setting up automatic transfers to your savings account is one of the most effective ways to accomplish this. Consider determining a portion of your paycheck that you can get by without each pay period, and create a recurring automatic transfer to savings that happens right after each paycheck is deposited.
- Knock down your debt — An important part of your budgeting strategy should be to pay down your outstanding debt as much as possible, with a particular focus on any debt that is incurring high levels of interest. If you’re carrying debt on multiple credit cards, consider devoting the bulk of your debt-payoff efforts to paying down the card with the highest interest rate first. Then, once that’s paid off, move on to the credit card with the next highest level of interest. Another option to consider is procuring a debt consolidation loan, which can allow you to consolidate all of your outstanding debts in one place, often with a lower interest rate. If this proves to be a good option for you, it can help reduce the amount of money you pay out in interest over the long haul.
- … And keep the credit card purchases to a minimum — Of course, to get out of credit card debt, you’ll want to avoid adding more. As much as possible, try not to use your credit cards to make purchases that you won’t be able to pay off in full at the end of your billing cycle — and before it starts incurring interest.
- Be flexible … and forgiving — As we all know, life can sometimes bring the unexpected — including unavoidable expenses such as car repairs, home repairs and medical bills that are outside of our control. While you’ll want to build some leeway into your budget to account for such variable expenses, it’s also important not to be too hard on yourself if these expenses add up and make you exceed your budget on occasion. When you miss your goal, do your best to forgive yourself and get right back on track the next pay period.
At The Southern Bank, we pride ourselves on offering friendly, personalized service to all of our customers — and that includes providing guidance when you have questions about any of our banking services. To learn more about our Personal Banking services ranging from Personal Checking and Personal Loans to Savings & Money Market, Certificates of Deposit (CDs), Mortgages and more, check out the Personal Banking page on our website or visit one of our local branches for friendly, in-person service with a smile.