Denice R. Preston
Because money and debt are inherently emotional, not having enough money can be overwhelming and stressful. A budget, and creating one, can help you take stock of your financial situation, assess it, and reduce stress related to money management. The best thing for your nerves is to take action.
Budget: What is its role?
A budget is a great tool to help you get out of debt. A budget sets clear rules about what you can and cannot do with your money. It also gives you a way to track your progress. It removes the guesswork from where your money goes and tells you when it’s on the right track.
Once you have a clear picture of where your money is going you can start to think about what you would like to do to achieve your goals.
How to Start a Budget if you’ve never used one
It’s not difficult to set up a budget if you have the right tools. However, it can be time-consuming. It can be difficult to maintain a budget if you don’t fully understand your goals and feel comfortable with them. The following steps are suggested by MMI’s Ultimate guide to creating a budget:
Identify your Why
A clear and meaningful reason to create a budget is the best way to make sure you have a budget. What is your why? It should be something that you are passionate about. Be as concrete as possible. This could be getting out of debt. You could save for your dream vacation. It doesn’t have to be complicated, meaningful, or motivating.
Prioritize your goals
What is most important to your life? What makes your day enjoyable, meaningful, and rewarding? What hobbies or activities are the most important? It is easier to make difficult decisions when you know your priorities. This means that if something is ranked highest as a priority it will be taken first. It is much easier to stay on track when your budget and spending are based on your priorities.
Keep track of your spending
Before you make any changes to how you spend your money, it’s best that you know where your money is going. You might think you know how much you spend on groceries, but you are actually more dependent on take-out food delivery than you realize. Only accurate tracking can show you where your money is going.
Select your preferred method
Which budgeting strategy works best for your needs? You’ll be more likely to stick with the style you like. MMI’s Ultimate Guide outlines the various budgeting styles including the 50/30/20 Rule and Zero-Sum Budget. It also explains how to avoid money wasting. You can take a look at the following to find out which one will work best for you. One of the two first options might work best if you are tracking down every penny.
You can then choose your budget tool. This could be a spreadsheet, an app, or a simple spreadsheet. Be aware of any subscription fees. You can search the Internet for a template spreadsheet and choose one that appeals to you.
Here are some other budget-friendly secrets:
When trying to reduce debt, it can be difficult to know where to cut back and make more room in your budget. These easy ways to cut down on spending include “batching” shopping trips to reduce spending exposure and tallying your online purchases prior to hitting “checkout.” You should also regularly review your recurring expenses.
Budgeting each paycheck is possible with a more detailed strategy. You might prefer a two-week budget. These budget secrets can be a great resource for more tips.
How Budgets Help with Unexpected Expenses
A good budget starts with clear priorities. First, the most essential expenses are those that directly impact core human needs like housing, food, and health.
Unexpected emergencies can be easier to manage if you have a budget. All the information you need to make informed decisions about, say, a car repair, is available in your budget.
You can cut costs to get the money you need for repairs. You may have to be a little behind in some areas, but you can see the big picture. This makes it easier to plan for unexpected expenses.
How to break bad money habits
Sometimes, we do things that may not be necessarily bad once or twice but add up over time and cause us to lose our best budgeting intentions. For example, ordering takeout multiple times per week because we didn’t shop on weekends. Bad money habits are those that go against your budget. But don’t feel guilty! These are some tips to help you get started:
It’s okay to not stress about it
Habits are psychological–they’re patterns that develop subconsciously over time. You can’t break a bad habit by feeling negative. Instead, try to create positive change.
Take a look at what triggers this habit
Many people stress shop. Every person is different. It could be your emotional state, a time of the day, or shopping with someone who overspends. Identify the moment when the habit takes root.
Identify the benefits you get from your habit
Is stress shopping a way to feel calm? Is it a way to feel connected or purposeful? You’re most likely to get something out of doing something you consider “bad”. Find out the positive return.
Try out other options
Perhaps your relationship with your mother is stressful. You notice that you can’t talk to your mother over the phone because you use Amazon to fill the virtual shopping cart. What can you do instead? Yoga? Exercise? Cancel the order by filling out the cart You might be able to find something similar, but without your credit card.
A debt management program from MMI might be the best option if you are still having trouble finding budget space for credit card debts. DMP clients can save thousands of dollars and get out of debt in five years or less by getting huge interest rate cuts on major credit cards. Get a free, no-obligation review to discover how much a DMP could save you.
