Make a budget, stick to it and live within your means. You don’t have to be the next Warren Buffett to make a budget work. The key is knowing where your money goes and how much you can afford to spend each month.
The best way to get started is by making a list of all your living expenses. Ensure you include everything from groceries and utilities to entertainment and personal care items. Then take that list and use it as a guide for tracking your spending.
If you’re not used to tracking expenses before, try downloading an app like Mint or Clarity Money to make budgeting easier. It’ll give you an idea of what percentage of your income is going toward each category so you can see how much money you have left over at the end of the month — which can help you better prioritize what needs to be cut out for your budgeting plan to work effectively.
Why is Budgeting important?
A budget will also help you stay on track with your financial goals, showing you how much of your money goes towards what. It will help you determine if you are spending too much money on certain things, which may indicate that you need to cut back on those expenses.
It’s also good practice for future planning and will give you an idea of what needs to be done to achieve certain financial goals.
The Three Pillars of a Good Budget
Achieving your financial goals.
The first pillar is to ensure you have a clear idea of what you want to achieve with your personal finance and how you will know when you are there.
Putting a plan in place.
The second pillar is creating a plan to help you reach your goals. The more specific the plan, the better chance it has of succeeding.
Making it fun!
The third pillar is about having fun with your budgeting process, which can sometimes be challenging, especially if you don’t know where to start or what to do next!
What Are Different Ways to make budgeting fun?
Budgeting isn’t just about numbers and percentages. It’s also about making sure you’re getting the most out of your money, so it’s important to have fun new habit. Here are some tips to help make budgeting fun money:
Change the Name of the Game:
Budgeting is a boring task requiring you to think about your money in a specific way. The name of the game, however, can make all the difference! Sometimes we get so used to saying “budget” or “spending plan, that” we forget how much more fun something like “budgeting for fun” or “budgeting enjoyable” sounds! So change up the name of your budgeting process, so it’s more fun and less stressful for you.
Budget for Fun:
Instead of budgeting, why not budget for fun? Make sure you’re spending your money on things that make you happy and help you live life to the fullest. It can be as simple as treating yourself every so often or splurging on a vacation with friends or family. You don’t have to spend a lot of money on these things, but spending time with people who mean something to you is always nice!
Make It Sexy:
Making money sexy is key to making budgeting fun. Start by examining your income statement and seeing how much is coming in versus going out each month. See where there are red flags or areas where it looks like you’re spending too much? Those are the places where you need to tighten up your belt and make changes. If you can’t cut back on something, like cable TV or eating out every night, maybe it’s time to look for a new job or look at different career options that might suit you.
This tip is for visual learners who need something concrete to work with when planning their budgets. The best way to do this is by using some visual representation for budget categories of spending in your budget (e.g., groceries, utilities). You could also use graph paper or even write out each category on separate pieces of paper so that they are easy to see at-a-glance (for example, “Groceries” written as a column across the same page; “Utilities” written as another column across another page).
The key here is to see where you’ve been spending money and how much you’ve spent in certain areas to avoid repeating those mistakes in the future.
Break Out the Monopoly Set:
Monopoly is an excellent game for teaching young children about budgeting because it involves working together as a team and sharing resources like money and property. The game comes with its board, pieces, money, and cards — all you need is four players! If you’re looking for an easy way to teach kids about budgeting but don’t want them to feel like they’re being forced into learning something new, this could be just what you need!
One of the best ways to stay on top of your budget is by using technology. Several budgeting apps and tools can help you track your spending, but the most popular is probably Mint.com. This free service will help you create budgets, set savings goals, and monitor your spending.
You can connect it with other financial apps and budgeting software, like Quicken and QuickBooks. Using this app or software on your phone, you can keep track of your purchases and import transactions from your bank account or debit card.
Get Help With the Boring Stuff:
One of the biggest challenges when it comes to budgeting is making sure you don’t spend money more than you earn each month — or at all, if possible! To help ease this burden, consider hiring an accountant or financial advisor to help you get organized with tax forms and other paperwork so that you’re not at risk for penalties or late fees from missing deadlines by a week or two.
Consider the 52-Week Challenge:
The 52-Week Challenge is fun to see how much money you can save each week during the year. You’ll decide on an amount to save money each week and then stick with it until the end of the year. At the end of the year, take stock of your progress, and celebrate your good fortune and hard work! Treat Yo’ Self” and make it a date night. Cook a fancy dinner.
52-Week Challenge works like this:
Make a $1 deposit into your savings account in Week 1.
In Week 2, deposit $2 into your savings account.
Once you reach the 52nd week, add $52 by adding a dollar each week.
By the end of the challenge, you’ll have saved $1,378. It’s not a bad way to save for holidays or an emergency fund.
Competing with yourself is a great way to keep track of costs and stay motivated. Set up competitions between how much money the whole family has saved up by the end of the month or how much they’ll put away at the beginning of each new month (assuming they’ll all contribute at least $1).
The winner gets something nice — like a new game system or laptop computer — while everyone else gets something less expensive: an extra week’s rent or utilities paid ahead of time, etc.
Save for Something the Family Wants:
When budgeting is fun, the step is making saving a priority. That means saving at least 10 percent of the living paycheck you receive and putting that money into a separate bank account or savings account. If you can’t save that much, start by setting aside at least $50 per week. Then, as your income and expenses grow, increase the amount you’re saving by about one-percent each time until you reach your goal.
Allow Space for Your Dreams:
Another important thing to remember when it comes to saving is that it doesn’t have to be all about recurring bills and rent payments! You should always allow space for your dreams, too — whether those dreams are big, like buying a house, or small, like taking a vacation every once in a while. How will you ever make anything happen if you don’t allow yourself any room for dreaming?
What are some obstacles to budgeting?
The biggest obstacle to budgeting is that it’s hard. It requires you to set aside a certain amount of money every month and then spend it on things you want to buy. If you don’t have enough money in your budget, you’ll be unable to spend anything else. It can lead to depression and other problems if left untreated.
The second biggest obstacle is that most people are terrible at managing their money. Most people only have about 20% of their income set aside for savings and retirement, so they’re already woefully behind where they should be in terms of saving up for a rainy day or retirement down the road.
The third obstacle is that people don’t think about saving for things like retirement until they’re much older than they should be (and many people even die with no money saved).
Chris Ekai is a Certified Public Accountant(CPA) and has a Bachelor of Commerce Finance. His writing interests include personal finance, budgeting and debt. Chris provides expert advice on how to manage money and stay out of debt. He offers tips and tricks for living a financially healthy life.