Mastering Your Budget: Tips for Financial Success

If you think sticking to a budget means you have to give up all the things you enjoy, you may want to reconsider. Budgeting can help you take care of the essentials, save for the future, and allocate money for things you enjoy without jeopardizing your long-term financial health. In fact, people who have a budget feel more in control and are more confident than people who don’t, according to a survey by the Certified Financial Planner Board.

If you’ve struggled to stick with a budget in the past or you’re new to budgeting, these tips can help you stay on track.

How to Stick to a Budget

Creating a budget is a relatively simple process, but it won’t do you any good if you don’t follow through. Sticking to a budget does require discipline, but there are some simple things you can do to make it easier.

Create a Realistic Budget

The first step to creating a budget you can stick with is to make it realistic. That means allocating enough money (without going overboard) to each expense or expense category for the month. If there are areas where you’re spending more than you’d like, it’s OK to trim your budget, but it needs to be attainable.

For example, if you allocate $500 a month to groceries for your family of four, you may be setting yourself up for failure. However, reducing your $1,500 monthly grocery budget to $1,350 is more achievable. This goes for saving, too, not just spending.

Let’s say you want to save enough for a down payment on a house, pay cash for a new car, and go on a vacation. Can you make each of those goals happen? You might be able to. Will you be able to make them all happen at the same time? Maybe not. Try to be realistic about the amount of income you can reasonably save each month and prioritize what’s most important to you.

Choose the Right Budgeting Method for You

There are several types of budgets you can choose from. The one that’s right for you depends on your income, budgeting style, and previous experience with budgeting. Here are a few popular budgeting methods to choose from:

• Envelope system: Folks who use this method divide their spending into categories, such as groceries or transportation, and assign a certain dollar amount for each category every month. When the money from a particular category is gone, the goal is to not make any more purchases in that category until the next month. If you must buy something else, you can take money from another envelope. However, you’ll need to reduce your spending in that category to make up for the shortfall.
• 50/30/20: With this approach, you use 50% of your take-home pay on necessities, 30% on discretionary items, and 20% on debt payments and savings. You don’t have to set up detailed categories for spending, and you can adjust the percentages based on your lifestyle and goals.
• Zero-based budget: People who use this type of budget give every dollar a job, such as rent/mortgage payment, car payment, utilities, retirement contributions, and more so that there’s nothing left over at the end of each month. It requires diligent tracking of how you’re spending and saving your money, so it can be a more intensive method to maintain.
• Pay yourself first: This approach is more flexible than some of the others. People who use it deposit money into savings first; then they pay for essentials, like rent, debt payments, and groceries. After that, they use whatever’s left over however they want.

Automate Savings and Bills

Autopay and automatic transfers allow you to seamlessly pay bills on time and “set and forget” your savings each month. With your savings on autopilot, you won’t be tempted to spend money you planned to set aside for long-term goals on something else. When you don’t have to remember to pay your bills, you won’t miss payments, which can negatively affect your credit scores.

Plan for Recurring Expenses

Including everyday expenses like food, transportation, and child care in your budget is easy to remember. However, other recurring but less regular expenses like gifts, taxes, insurance, and annual subscriptions are easy to forget. Still, you need to include them in your budget; otherwise, you could come up short in the months you have an irregular expense.

Skip Impulse Purchases

It may be easier said than done, but skipping impulse purchases (at least for now) can help keep your budget on track and reduce financial stress. According to a You Need a Budget (YNAB) survey, 52% of impulse buyers reported delaying large financial goals and 47% said they sometimes experience increased stress due to unplanned purchases.

To reduce or eliminate impulse buys, consider instituting a waiting period if you come across an item you want but weren’t planning to buy. This gives you time to evaluate whether it’s really worth it. You may forget about it or decide it’s not that important, but if you still want the item when the waiting period is up, you can go back and purchase it. (This is a great strategy to use with kids too.)

You could also designate a small amount of money for impulse purchases so they don’t derail your overall budget.

Hold Yourself Accountable

Having a plan isn’t enough to stay on budget—you need to follow through. Working with someone who can help you stay on track can improve your chances of sticking with it. If you’re married or in a long-term relationship, you should include your partner in the process. If not, recruit a trusted family member or friend.

Make Adjustments as Necessary

When your budget’s been in place for a few months, it’s a good idea to compare your actual spending to the amount you budgeted. Are you on track? Did you spend more than you thought you would on groceries or less than you planned on transportation? If your spending doesn’t align with your budget, you may need to make some tweaks.

There may also be times when your budget needs an overhaul because of significant life events, such as the birth of a child, death of a spouse, long-term illness, loss of a job, and more. Don’t be afraid to adjust your budget as life evolves. Having a budget that is aligned with your reality will make it easier to stick with.

Keep Your Budget on Track

Creating a realistic budget lays the groundwork for establishing and maintaining good financial health. If you’ve never had a budget or haven’t been able to stick to one in the past, these tips can help you tackle some of the challenges that can get in the way.

Regardless of which budgeting method you choose or how you approach sticking to a budget, remember why you want to stay on track. Do you want to be able to pay for your child’s college education, purchase a vacation property, or provide financial support to your elderly parents? Reminding yourself what’s most important can help you stick to your budget and avoid spending money in ways that can get in the way of achieving your larger goals.

At O1ne Mortgage, we understand the importance of financial planning and budgeting. If you’re looking to save for a down payment on a house or need advice on managing your finances, give us a call at 213-732-3074. Our team of experts is here to help you achieve your financial goals and secure your future.