Budgeting: Every Penny Counts!
Do you know where every penny of your paycheck goes? If not, I bet you find yourself wondering where all your money went toward the end of the month. If this is you, you may want to consider budgeting. Budgeting is an essential step toward financial wellness. It allows you to pinpoint weak areas in current spending habits and improve upon these areas to help you achieve financial wellness.
Buy a new shirt? Pick up breakfast on the way to work? Transfer money to your savings? Your child paid you back the $20 you loaned them last week? Great, Track it!
The first step in budgeting is to keep track. Keep track of current expenses and spending habits for one to two months. This will give you ample tracking time to determine established spending habits and get a better sense of areas that could use improvement. You can easily track your expenses and spending on a sheet of paper, an excel spreadsheet or an app on your smart phone. A quick “budgeting worksheet” search on Google will give you a good idea of the expense categories you should be tracking. The search should also provide you with a quick budgeting spreadsheet you can print or download. Or you could opt to use one of the many budgeting apps available. Some of the apps we have used and liked for budgeting include EveryDollar and Prism.
Once you have tracked your spending, you can look for ways to cut back. If you find you are overspending every month, prioritize categories and look to reduce those with the lowest importance until your budget is balanced. Of course, you should always be the highest importance. Don’t forget to pay yourself first!
Your budget should be created to fit your lifestyle. This may mean you opt to brew a cup of coffee at home rather than stopping on the way in to work. You may opt to cancel the gym membership, monthly subscription boxes, or magazine subscriptions you are paying for every month but not using. Whatever your budget comprises, make sure you allocate what you budgeted for savings at the beginning of the month. If at the end of the month you still have discretionary funds, consider putting that extra money to your savings or investments.
Don’t Touch It
If it isn’t in the budget, don’t spend it. If it’s an emergency, pull from your emergency savings. A rule of thumb in finance is to keep three to six months of living expenses in emergency savings.
Budgeting can help you focus on your finances and give a purpose to each purchase. If you are looking to improve your overall financial wellness, budgeting is a great first step.