Budgeting. Money. Bills. Due. Payment. Credit. Debt. Loans. This can all be so overwhelming. Especially when you have big dreams and a wallet that isn’t quite as big. I’m not judging you; I’m in the same boat. There are so many things that I want to do and experience in my life, but it’s easy to get caught up in all of the bills that need to be paid.
Want to work on your budgeting skills? I have some tips for managing your money more efficiently.
- Bills: Your first step should be to figure out how much you are budgeting for each part of your life. Start by writing down all of your bills on a piece of paper with their date due and if it is auto-pay. Read through the list and see if there is anything that you can eliminate. You would be surprised how many re-occurring bills you have that you don’t need or can decrease the cost of. I cancelled my makeup subscription. I ended my phone plan and started a pre-pay plan for only $30 a month. Then, with the remaining bills, I added them up and subtracted from the overall household income. This tells me what “surplus” we have to work with for groceries, gas, and other things of that nature. Later you can break this down by paycheck on a calendar to make sure you save enough money for your bills or pay them when you have a little extra available.
- Necessities: Now you need to figure out how much needs to be put toward those things that aren’t necessarily monthly bills, but are needed such as gas and groceries. You can calculate gas cost by estimating miles driven per week. Then divide that number by your cars average miles per gallon (you can do this by filling your car completely with gas, resetting your trip mileage, drive until the car is empty, and refill completely. Take the number of miles on the trip marker and divide it by the gallons needed to fill your car). Once you have the miles driven weekly divided by your car’s average miles per gallon, you will have the average gallons of gas that you use per week. Then multiply that number by the cost of gas per gallon to get your weekly cost of gas usage. I suggest rounding that number up. If, after the math, you got $35 per week, I would budget $40 per week for gas costs. If you have to pay for public transportation or parking, I would factor that into your budget also. To figure out your grocery budget, I would track costs for groceries for the next month. If you have been spending about $150 per week in groceries, start there. Grocery bills are the easiest way to decrease spending by using coupons, checking the weekly deals, and being creative with meal prepping.
- Savings: After subtracting bills and necessities from your income, figure out how much you would like to put into savings. My biggest advise is to focus on building an Emergency Fund as soon as you can. If something comes up, like medical bills or car repair, you will have a bit of cushion to help with budgeting. I suggest having at least $1,000 in your emergency fund, but if you can, aim higher. A lot of online banking allows you to set up automatic transferring of funds. You can set it up so $20 (or whatever you can afford) will be transferred over weekly (or biweekly). Just remember to account for it when budgeting.
- Debt Reduction: After building up your savings account, turn your focus over to debt reduction. Nobody wants to pay for interest charges or have a low credit score. We focused our energy on debt reduction and were able to eliminate our credit card debt and increase both of our credit scores and now have excellent credit. Interest charges are unnecessary payments. Once you pay off debt, you have extra money to put toward a dream vacation or that big purchase you have been wanting.
- I suggest using cash as much as you can. This is a much more visual representation of your spending and, for me at least, makes it harder to spend money on unneeded things than just swiping a card. For a while we used an envelope system that worked great. For this, you have an envelope for each section of your budget. You will have an envelope for gas, groceries, entertainment, toiletries… On the envelope, you will write the budget type (for example groceries) and how much money you are budgeting for it. Keep the cash in the envelope. When the cash is gone, you have spent your budgeted amount. This is much easier to keep up with than keeping tallies as you go or checking your bank account regularly to calculate how much money you have left for each section of your budget.
- Be realistic with your budget. Don’t slash numbers yet. Work on staying under your budgeted amounts for a couple months before you start to decrease your amounts. The first place you can start, when you are ready, is with your grocery bill. You can work your meals around what is on sale for the week. Eating seasonally often helps with budgeting – for example, strawberries are more expensive in the winter. Another idea is to make big batches of things like soup and freezing what is left over so you can have a meal ready for a later date. Eating at restaurants is an expensive habit, so work on cooking at home more often too.
There are some really great online sources for budget binders and how-to guides for budgeting. There are a million other things that you can do to help with budgeting and quality of life, but I hope that the tips I listed above will be a great start for your journey!
Work hard, play hard.