Budgeting is one of those topics that reminds us that we are now adults, with dreary responsibilities. If this is your feelings on budgeting, you could always think of it as “creating a spending plan.” That’s a more empowering phrase.
There are many more reasons to budget than just to control where your money is going. Budgeting on a regular schedule will reveal new things about your spending habits which you didn’t realize. Budgeting, over time, will give you insight into economic clout you didn’t know you had. A large purchase that may have been out of your reach becomes feasible when you routinely save away a small amount towards the payment.
Here’s a list of budgeting practices. These are the broadest consensus among experts for smart steps to direct a household budget:
Budget every dollar
This is called the “budget to zero” rule. Every dollar has to be accounted for, divided up into necessities, luxuries, and debt repayment or savings. If you have money left over for impulse purchases or emergency funds, call it that.
Do the family budget as a family
If you’re married, sit down once a month and work out the next month’s budget together. Statistics show that stress over money is one of the chief areas of complaint in relationships. By having everybody on the same page regarding spending, there won’t be an unexpected shortfall. If there are any members of the household who also earn money, they should be included. Especially the kids. Establishing good spending habits is one of the best lessons you can instill in a child.
Forecast ahead for expensive months
We all know that tax time is a once-a-year budget effect. Add to this small annual or semi-annual expenses: Picking up a re-certification, buying back-to-school supplies, or weatherizing for home maintenance. Track these and anticipate them as far ahead as possible, so you know to save ahead for them rather than try to cover everything in one high-cost month.
Prioritize paying off debt
Interest on unpaid debt is literally an anti-budget: You’re paying for something you bought in the past and likely already used. Once you get out from under debt, you can allocate that same money towards savings so you get out of debt quicker.
Look anywhere for an expense trim
We’re used to thinking of almost every cost as a “necessity.” In fact, there is nearly nothing in your budget that you couldn’t cut down on spending if you had to.
• Rent and bills – You could move somewhere cheaper, or insulate to save on heating.
• Food – You could cook at home instead of eating out. If you cook at home already, you can consider less expensive meals. Even the most rock-bottom grocery bill can usually find a few generic-brand substitutes for name-brand products.
• Clothing and furnishings – You can get a lot of mileage out of shopping at used goods stores, flea markets, and other budget venues. Don’t forget to keep an eye on Craigslist and other online classified sites. There’s always a neighbor giving away a couch somewhere.
• Entertainment – Have you considered cutting your cable and watching a cheaper subscription video service online? Playing free mobile games in place of top console titles?
While we’re talking about cheaper living, there’s a neat concept we call “upcycling.” This is where we save the environment and get something for nothing at the same time. Save on trash bags by reusing grocery bags you get from the store anyway. Most Tupperware can be replaced with storage containers from the foods you were buying anyway. Anybody with a grandma can tell you about old cookie tins used for storing sewing, or the drawer where you save wire twist ties.
Schedule everything as much as possible
Even things that you’re free to do anytime will be less stressful when you pick a specific time for them. Commit to doing grocery shopping on the fifth and eighteenth of the month, for instance. It’s easier to stick to consistent spending habits when they’re a regular occurrence.
Track every purchase
it’s simple to save the receipts from everything and add them up once a week. If you find yourself making lots of incidental impulse purchases, use this as an opportunity to make an adjustment in your budget to allow for it. Or maybe you’re buying something in small units that would be better dealt with as a bulk purchase once a month.
A good way to sort the “needs” from the “wants” is to look at your expenses and ask “if I could only buy one thing this month, what would I pick?” Put a “1” next to the answer, then a “2” next to the next-most important thing, and so on. In this way, you’ll have a good fix on what you can cut in your budget without too much pain.