If 2020 has your mind on your money, you’re not alone. Whether you’re working from home and saving money on going out less or your employment situation has changed and your budget needs to change with it, it’s a great time to re-evaluate your financial goals. Read on for five painless ideas to make budgeting easy.
Figure Out Your Goals
Most people are better about sticking to their workout routines if they know what their goals are. After all, waking up at 5 A.M. to hit the gym isn’t much fun, but if you know it’s preparing you for your bucket-list trip to the Pacific Crest Trail, it feels important.
Financial goals are the same way! Managing your money better is a strategy, not an objective. Getting a handle on why it’s important to you to manage your money will guide your decision-making, help you set priorities, and offer you a way to make sure you’re staying on track. Everyone has slightly different financial goals, so take some time to sort yours out before you start making a budget, and be open to modifying them as your life changes.
Have a Head for Numbers
You don’t have to be a math whiz to budget successfully, but there are a few important numbers you need to know for a full picture of your financial health. All budgets require you to know your cash flow in both directions—income and expenses—so you can allocate non-negotiable things, like health insurance and taxes, and leave room for discretionary spending. This is also your chance to earmark a certain portion of your monthly earnings to pay off debt or build savings.
There’s one other number you need to watch—your credit score. Your creditworthiness determines how much interest you’ll have to pay on home and car loans, and landlords will examine it, too, so your credit score affects where you can rent. Get a free credit check so you can understand how lenders see your financial history and where you need to improve.
Beware Surprise Expenses
Unfortunately for your budget, life happens, and you might need to pay for vehicle repairs, a vet visit, or some other substantial but one-time expense. While it’s tempting to write off unexpected, non-repeating expenses as infrequent flukes, if you track your expenses well, you’ll discover that almost every month has at least one surprise.
The best way to handle this is by designating some of your discretionary spending money as an emergency budget so you’re ready for financial shocks. If you make it through the month without an irregular expense, set the emergency money aside—don’t spend it! You’ll be more prepared and less stressed as your rainy-day fund grows.
Ignore the Cash-Only Crowd
If like many people, you shop online a lot, you might have been put off budgeting before by fans of the “envelope method,” which describes a cash-only system where envelopes, each representing a budget category, hold the cash amount allocated for the month. Any money that’s spent has to come out of the envelope.
For most people, this is an impractical, cumbersome system, and it leaves credit card rewards on the table. Rewards programs like cash back can put money in your pocket as long as you keep your credit card spending within your means and boost your credit score as you prove to lenders that you’re capable of repaying a balance on time and in full.
Find Ways To Have Fun
Sometimes, when you’re on a budget, you have to say no to certain things. Realizing that you can’t treat yourself indiscriminately can come as a shock if you’re new to being careful with your money. Self-control is an indispensable part of a budget, but that doesn’t mean you have to be unhappy living within your means. Make “fun money” a line item in your budget, and don’t stress if you spend it all—the purpose of those dollars is to make you feel good!
Additionally, avoid comparing yourself to other people, and cultivate gratitude for the things you do have. Above all, don’t forget that keeping to a budget will get you to a happy place with your money much faster than overspending will.
While it can be challenging to make a budget and stick to it, it’s almost impossible to achieve financial stability without one. Remember that you’re making your budget for your benefit, and keep your dreams in the forefront of your mind so you stay motivated.