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You’ve made a great step toward your financial health by creating a budget. Sticking to one and making conscious spending decisions is harder in practice. It does, however, get easier with regular and consistent practice. Let’s talk about how to make the most of your money by staying conscious of your budget.
1. Pay yourself first
The first and most important aspect of creating a budget is handling your savings and expenses. It is ideal to allocate about 10–20% of your monthly revenue to savings—if that is not attainable, you should just do what works best for you. A convenient way to ensure that your savings doesn’t get spent is to open a separate savings account and have automated monthly transfers to that distinct account. For extra incentive not to dip into that account, you can choose an account type that includes a penalty for impromptu or early withdrawals.
2. Start a weekly allowance
A weekly allowance or allocation for expenses like groceries, transportation, and possible miscellaneous items is sure to keep you on track with your budget. This is a great way to keep yourself accountable and prevent overspending. An ideal way to go about your weekly budget is to use cash for your weekly allowance.
Withdrawing the cash amount you've allocated yourself will keep you conscious of your expenses and prevent overspending. Once you've hit your limit for the week, you'll have to wait till the next week to make another withdrawal.
3. Cut down on non-essential expenses
A common example of frequent non-essential expenditures is buying a cup of coffee daily. Many people excuse their daily Starbucks with something like ‘It’s just six dollars,' therefore translating the expenditure as insignificant. However, you can save over $1,000 dollars annually by making your own coffee every morning. There are many similar expenses that you can cut down on, such as eating out or monthly subscriptions. A recent study found that on average Americans spend $219 each month on subscriptions. Find out the non-essential and recurrent expenses in your daily life and cut down on them.
4. Involve the family
If you are married or live in a household where expenses and bills are shared, budgeting must be a joint activity. It would be counterproductive to your budget if you were making all the right moves, but your spouse was spending away. Everyone in the household should be involved in budgeting. If you have children, this is a good opportunity to start teaching them about proper financial management. When the entire household is involved, budgeting will feel like less of a burden because you aren’t doing it alone.
5. Cut the credit cards
Credit cards can be one of the biggest hindrances to proper budgeting. If you have any credit card debt, you understand how devastating it can be to constantly have to set apart a portion of your income to pay it back. If you can afford to, the best thing for your budget would be to start paying off your credit cards.
6. Allow yourself some treats
Life isn’t all about being economical with your finances. If you dedicate all your time to meticulous budgeting or conscious spending, you are likely to end up frustrated, which can lead to outbursts of irresponsible spending. To avoid this, you should always include an allowance in your budget to treat yourself. Buy yourself a nice meal or some nice clothes. Don’t let your budget stop you from enjoying your money. Responsible budgeting is not about constantly restricting yourself but about practicing moderation with your finances.
7. Always include miscellaneous items
Sometimes you may have an unexpected expense that isn't an emergency but is just unplanned. That is why you should always include a miscellaneous category in your budget. When you have money set aside for surprise expenses, you won't have to cut into your savings or other budget categories to handle them when they pop up.
What are the next things you can do to take your savings to the next level?
Start an emergency fund
An emergency fund is essential for everyone. Emergencies are not the same as miscellaneous funds or savings. Your emergency funds are for desperate times, such as if you lose your job or if a family member falls ill.
Pay off debt
Paying off debts should be a priority for conscious spending. Whether it comprises credit card debts, student loans, or anything in between, getting rid of your debt as fast as possible is necessary to have more disposable income to divert to other channels, like savings or investments. Tailor your budget to paying off your debts.
Look at investment options
Investments, especially long-term investments, are ideal for building wealth. Instead of letting your money sit idle, find a safe and reliable investment and allow it to build with time.
Power Financial Credit Union can help
Conscious spending can be very difficult, especially when you are just starting, but rest assured that it is possible to be a pro at it. Consistency and discipline are key when it comes to creating and maintaining a budget. When you end up overspending or not hitting your goals, don’t give up, and when you are tempted to spend outside of your budget, remember why you started it in the first place! Contact Power Financial Credit Union today to help you with your budgeting process.
You’ve made a great step toward your financial health by creating a budget. Sticking to one and making conscious spending decisions is harder in practice. It does, however, get easier with regular and consistent practice. Let’s talk about how to make the most of your money by staying conscious of your budget.
1. Pay yourself first
The first and most important aspect of creating a budget is handling your savings and expenses. It is ideal to allocate about 10–20% of your monthly revenue to savings—if that is not attainable, you should just do what works best for you. A convenient way to ensure that your savings doesn’t get spent is to open a separate savings account and have automated monthly transfers to that distinct account. For extra incentive not to dip into that account, you can choose an account type that includes a penalty for impromptu or early withdrawals.
2. Start a weekly allowance
A weekly allowance or allocation for expenses like groceries, transportation, and possible miscellaneous items is sure to keep you on track with your budget. This is a great way to keep yourself accountable and prevent overspending. An ideal way to go about your weekly budget is to use cash for your weekly allowance.
Withdrawing the cash amount you've allocated yourself will keep you conscious of your expenses and prevent overspending. Once you've hit your limit for the week, you'll have to wait till the next week to make another withdrawal.
3. Cut down on non-essential expenses
A common example of frequent non-essential expenditures is buying a cup of coffee daily. Many people excuse their daily Starbucks with something like ‘It’s just six dollars,' therefore translating the expenditure as insignificant. However, you can save over $1,000 dollars annually by making your own coffee every morning. There are many similar expenses that you can cut down on, such as eating out or monthly subscriptions. A recent study found that on average Americans spend $219 each month on subscriptions. Find out the non-essential and recurrent expenses in your daily life and cut down on them.
4. Involve the family
If you are married or live in a household where expenses and bills are shared, budgeting must be a joint activity. It would be counterproductive to your budget if you were making all the right moves, but your spouse was spending away. Everyone in the household should be involved in budgeting. If you have children, this is a good opportunity to start teaching them about proper financial management. When the entire household is involved, budgeting will feel like less of a burden because you aren’t doing it alone.
5. Cut the credit cards
Credit cards can be one of the biggest hindrances to proper budgeting. If you have any credit card debt, you understand how devastating it can be to constantly have to set apart a portion of your income to pay it back. If you can afford to, the best thing for your budget would be to start paying off your credit cards.
6. Allow yourself some treats
Life isn’t all about being economical with your finances. If you dedicate all your time to meticulous budgeting or conscious spending, you are likely to end up frustrated, which can lead to outbursts of irresponsible spending. To avoid this, you should always include an allowance in your budget to treat yourself. Buy yourself a nice meal or some nice clothes. Don’t let your budget stop you from enjoying your money. Responsible budgeting is not about constantly restricting yourself but about practicing moderation with your finances.
7. Always include miscellaneous items
Sometimes you may have an unexpected expense that isn't an emergency but is just unplanned. That is why you should always include a miscellaneous category in your budget. When you have money set aside for surprise expenses, you won't have to cut into your savings or other budget categories to handle them when they pop up.
What are the next things you can do to take your savings to the next level?
Start an emergency fund
An emergency fund is essential for everyone. Emergencies are not the same as miscellaneous funds or savings. Your emergency funds are for desperate times, such as if you lose your job or if a family member falls ill.
Pay off debt
Paying off debts should be a priority for conscious spending. Whether it comprises credit card debts, student loans, or anything in between, getting rid of your debt as fast as possible is necessary to have more disposable income to divert to other channels, like savings or investments. Tailor your budget to paying off your debts.
Look at investment options
Investments, especially long-term investments, are ideal for building wealth. Instead of letting your money sit idle, find a safe and reliable investment and allow it to build with time.
Power Financial Credit Union can help
Conscious spending can be very difficult, especially when you are just starting, but rest assured that it is possible to be a pro at it. Consistency and discipline are key when it comes to creating and maintaining a budget. When you end up overspending or not hitting your goals, don’t give up, and when you are tempted to spend outside of your budget, remember why you started it in the first place! Contact Power Financial Credit Union today to help you with your budgeting process.