JoshKeeping bills and finances in check is a stressful task for many people, but if you wake up and find yourself in any kind of debt, then it’s best to act fast in order to get ahead of it. Thankfully, getting on top of your debt can be easier than you may think possible. Not only are there plenty of support structures in place by lenders to accommodate customers experiencing financial hardship, but you can also enlist the services of a qualified financial advisor to provide you with additional guidance with your budgeting if need be. And you’d be surprised by just how impactful this additional guidance can be – especially if you’re not feeling that gung-ho about the prospect of making and sticking to a budget.
Continue reading for some of our top practical guidelines to help you stay current and plan for a financially savvy future, even in the face of debt, and even if saving and budgeting don’t particularly come naturally to you.
Evaluate Your Current Spending Habits
When looking to boost your saving power, the best place to start is simply by trimming the fat of your current monthly expenses. To begin, work towards establishing mindful habits regarding your cash flow routines. Instead of blindly opening our wallets for various desires, let’s get hold of ourselves and start tracking expenditures, categorising them wisely according to needs vs. wants.
Most mobile banking apps actually have integrated expense tracking features now, so this step can be as easy as looking through your expense breakdown every month and making a commitment to spend less on unnecessary spending categories (like retail and entertainment).
It also goes without saying that you need to prioritise expenses like your housing (rent, mortgage payment), utilities, and groceries over these more non-essential spending categories. This may seem obvious, but we tend not to think in these terms in our daily lives. However, suppose you have more extensive plans, such as saving for a new vehicle or similar expenditure. In that case, meticulous tracking of your spending habits is vital. You won’t make progress without it.
Set Limits…Slowly
If you’re a notorious impulse spender, then the best way to curb this pesky fiscal habit is to use boundaries for discretionary spending. Once the priority needs listed above have been met for the month, limit further “pleasure spending.” Impulsive purchases like a daily coffee shop latte or the latest designer smartphone case can wait. Of course, discretionary spending is a habit that naturally builds over time, so be patient with yourself too. So long as you’re spending with debit on your impulse purchases, this habit shouldn’t put you in even more debt.
On that same note, it’s recommended that you be very strict with credit card spending – especially if you carry over a monthly interest balance. This isn’t helping you reach your goal. Consider waiting for all discretionary spending until this balance is paid off. Afterwards, make it required that you pay off credit balances every month or perhaps carry a minimal balance; this will improve your credit score when it comes time for your first mortgage or car loan.
Visualise Your Finances
To begin tracking monthly spending, use a budgeting app on your smartphone or create a basic spreadsheet with line items for all your grocery and utility bills, due dates, income sources, and credit balances. It’s easier to track spending when you can visualise dollar amounts and commitment times, preventing things from getting out of control. Set alerts for due dates and budget goal thresholds.
Keep receipts for groceries, fuel, and repair expenses. Use coupons, take advantage of reward programs, special discounts, and sales, and plug these numbers into your spreadsheet. For positive reinforcement, track your savings each month. Use these funds to pay down credit balances instead of impulsive purchases.
Automate Where Possible
On-time payments also improve your credit score and reduce stress and workload. Use automatic transfers from your checking account and prevent late fees for commitments such as your cell phone, utility bills, car loans, and rent payments.
Sign up with your employer for paycheck direct-deposit systems and pre-tax contributions toward retirement savings accounts. Enable alerts for these transfers, due dates, and statement availability notices. Plug these numbers into your main tracking application or spreadsheet immediately. You’ll notice it becomes enjoyable to see this activity in motion; you’ll learn more and become a better budgeter the more you practise it.
Consider Weekly Reviews
We often think of budgeting in terms of monthly activity. Still, a more proactive approach is using weekly check-ins to quickly identify changes in spending patterns. The holiday season would be an excellent example of times when you deviated considerably from the plan.
A weekly approach would limit the damage instead of the impending end-of-month shock as you review the increased spending. Stay flexible and resist temptations during holidays when we are constantly subjected to advertisements looking for our hard-earned money.
Weekly assessments also prevent minor issues from snowballing into significant problems. Sometimes, technical glitches manifest in the form of expired passwords and credit/debit cards, which would impede our automation efforts. Read and respond to all alerts and emails from your financial-related systems promptly.
Safety Net Fund
A foundational piece of budgeting is your emergency fund. Once you’ve gotten control of spending habits and implemented a tracking system, it’s time to establish or grow the safety net you’ll use for unforeseen emergencies and expenses.
Start with an achievable goal and gradually increase the contributions to this account. Seemingly small amounts still add up over time, and if placed into an interest-bearing account, you’ll see significant progress.
Like other facets of our advice, use automation to simplify the process. Treat this contribution as a non-negotiable “expense.” Use periodic lump sums from things like work bonuses or tax refunds as significant building blocks for this fund. A reasonable target amount for a safety net is three to six months’ worth of living expenses set aside in an account isolated from your checking account. This reinforces the dedicated purpose of “emergencies only.”
Embrace The Process
Budgeting is like any other life skill. The more you practise, the better you will become. If you hate thinking about financial skills, it’s important to remember that everyone goes through this. We all have certain insecurities about various traits and life experiences. With repetition and implementing the tips we’ve covered, budgeting truly becomes second nature like anything else.