Budgeting isn’t limited to kids making the money from their after school jobs last. With today’s declining economy, more and more families need to budget their money to stretch out their paychecks. Whether it’s families living paycheck to paycheck or those trying to increase their savings, sticking to a budget can be difficult for people of all incomes.
The most important step is to understand the situation you’re in. Outline the exact amount of expenses and income per month. When outlining income, make sure to only include stable income. Including additional income, like overtime or infrequent side jobs, give an inaccurate portrayal of your finances. Outline expenses by including everything, no matter how small the amount because all those little expenditures add up.
The first step in creating a budget is understanding exactly what your situation is. Here are some tips to help ensure you stick to your budget:
The key to sticking to your budget is creating a budget that is realistic. When outlining your expenses make sure to round up, so that you don’t blow the budget through no fault of your own. Although your monthly expenses are usually around the same amount, there are always unexpected discrepancies that can throw off your finances. Don’t base your monthly electric bill budget on the lowest bill you’ve ever received. Rounding up on your expenses ensures a realistic financial plan and helps to make sure you stay on budget each month.
A major obstacle in staying on track is the frustration that comes when you go over budget. Many people discard their budget at the first sign of failure. Providing yourself some breathing space or making small allowances is a way to learn from mistakes, and continue to make progress on staying on track. There will always be occurrences that cannot be planned for. Allowing yourself a $50 a month car maintenance fee is doomed the second you get a flat tire on the way to work. Instead of bagging the budget all together, give yourself some leeway for those types of emergency expenses. A leeway bracket on your budget allows for breathing space for unexpected big expenses, or small overages in other areas of the budget.
Cash on hand
Carrying around cash is the biggest hindrance to staying on a budget. The change from purchases ends up as lost money at the bottom of a purse or jingling around in pockets everywhere. That crisp twenty quickly becomes just a few dollar bills, and it’s hard to keep track on where it was spent. Eliminating cash from your spending habits keeps frivolous and spontaneous purchases from getting out of hand.
There are some budgeting software tools that help to track and categorize personal spending, but they can be pricey and a little complicated. Another option is to hand write your budget spending, but the paper clutter will start to stack up. Tech savvy people can use a simple Excel spreadsheet application, but being diligent about tracking every single thing purchased can become tedious. Thankfully, many banks have altered their services to help out with the budgeting trend. PNC bank offers a great service called Virtual Wallet. This is a free application that automatically tracks and budgets purchases made with your Visa Check Card. Seeing exactly how much is being spent is crucial in staying on budget.
Don’t do it alone
Many households give the financial burden over to one person because it’s confusing having more than one person inputting into the written budget. However, involving other people into your budgeting process is a great way to stay on track. Many banks offer a messaging system to alert you by email or text whenever the bank card is used. Although it’s predominant purpose is to be alerted to fraudulent purchases, it is also very helpful in alerting your partner on expenditures. Involving someone else can help to add the voice of reason, as well as add a guilt factor to impulse purchases.
No matter what the income is, staying on a budget is possible as long as you are fully aware of your financial situation. Even if you always buy things on sale and you use coupons as much as possible, keeping a budget is crucial in making your checks last and developing your savings. Living above your means can happen to people of all different incomes. Staying on a budget can be the difference between living paycheck to paycheck to finally having the savings for the dream home you’ve always wanted.