There’s a moment when you first realize that you’re not budgeting adequately that you feel a sense of raw panic. “I’ve never had to do this before!” you might think. Or, “I’ve muddled along all right so far, but now, I just can’t figure this out!” The good news is, you can learn how to budget and save money without too much stress–and it doesn’t require as much time crunching numbers as you might think.
Start simple. For one month, actually write down everything that you spend money on. For some people, this is a huge first step: just learning how to keep track of where every penny of their money is going (if you’re having trouble, start by rounding up to the next dollar–it might be simpler to keep up with). At the end of the month, sit down and look at where your money has really gone. You may be surprised by some of it! For example:
Every morning, you stop at Starbucks on your way to work. You need your coffee fix, and you’ve gotten used to their coffee. You have your drink, and the girl at the counter knows you by name. It’s just $4.42 a day. You barely even think about the fact that you’re spending that money…until you realize that $4.42, five days a week, is $22.10. Over the course of a month, that’s more than $88. Ninety dollars or more a month…on coffee? Wow. That’s eye-opening.
Or maybe you have your debit card linked to your Amazon or iTunes account, so you don’t ever have to actually pull it out when you want to make a purchase. A dollar for a song here…well, you liked that entire album, so you spent the ten to buy all of it. Or maybe it’s movies: you were bored one night, so you went ahead and rented that $3.99 HD movie. And the next night…and the next one, too, because, gosh, what are you supposed to do at night? What does your entertainment budget really look like over the course of the month, when you break it down into hard numbers instead of, “Well, I just spent a dollar on it…”
Perhaps, instead, your weakness is restaurant food. You’re only feeding yourself (at least for lunch), and that’s less than $10 a day…and only on weekdays. It’s not really that much…is it?
That depends on what your budget actually looks like. Learning to take your lunch to work just three days a week could save you thirty dollars a week…a hundred and twenty dollars a month…well over a thousand dollars a year.
When viewed over the course of a month, those “small” amounts suddenly loom a lot larger–and are a lot harder to justify to yourself. That’s where your budget starts: looking at those big, end-of-the-month numbers and how they’re really affecting your budget and deciding where you can afford to cut corners for a greater end result.
Next, list out your mandatory expenses. That means your weekly gas, your electric and water bills, your insurance. These are the things that you have to pay (though there are ways to lower those, too). Guessing? Guess a little higher than you really think–you can always revise it later. Remember, if you’re really writing down what you’re spending for a month, then these things are already included. Take a look at any planned major expenses that you’ll have coming up, too: regular maintenance on your car, medical expenses that you know are coming, or repairs or renovations you know you’re going to have to make to your home. Divide those out by the length of time you have until you’re going to have to pay them, and add them to your known expense list; then, subtract them from your actual take-home income.
Now you know how much you have to work with.
Ask yourself what additional expenses are most important to you. For example, you might be making date night with your spouse a priority–that means that you write it into your budget. Or, you might be saving up for a special vacation: add that in, too. Forcing yourself to look at your priorities on paper makes it easier to ignore those impulse buys that wreak havoc on even the best budgets.
Look at what’s left. Assign every dollar a purpose. Make sure that at least some of it is allocated to spending money–if you budget yourself too tightly, you’ll have a harder time sticking to it
Try to allocate a specific amount to savings, whether that’s a specific dollar amount or a percentage. When your check appears, take that amount out and put it into your savings account first–that way, you’ll be less likely to “cheat” with it.
You can build a budget and save money. It might be a new experience, for you, but that’s okay! You’re up to the challenge; and you’ll certainly appreciate the rewards in the long run.