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Are you trying to get your budget under control so you can achieveyour financial goals, such as traveling more, getting out of debt, or building up your savings? Or, with the economic downturn we’re experiencing because of the virus and quarantining, maybe you’ve lost a job or had your hours cut back. Regardless of why you need to get your budget under control, it can be a challenge.
Are you tired of over-spending week after week, month after month and tired of being stressed about money? Know that you need to do something about it if you ever want toachieve your goals,but you’re not quite sure where to start?
Believe me, we’ve been there. In fact, we’re still working towards our goal of full-time travel followed by living where we want, not where the job market dictates. It’s not a goal that can be achieved overnight.😉 But before we were able to start working towards that goal, we had to lay some groundwork. This groundwork can also help you get a good start on your goals.
1. Spend a month and track all your spending.
If your budget is out of control, the first thing to do is totrack all your spending. Usepaper, an app, a spreadsheet, whatever, just make sure you know where your money is going. If you haven’t been doing so, it can be very eye-opening to add up just how much you spend on eating out, entertainment, or even groceries.
To be even more accurate (especially with how our spending habits have changed while staying home), take the time to go back through your statements and track your spending for the last couple months. You’ll need your notebook, app, or spreadsheet for this as well.
For years I’ve used a notebook and pen to track our bills every month, but I’ve recently started using Personal Capital, and it’s been eye-opening. Personal Capital tracks our spending in each category much more accurately than I was doing with paper and pen.Personal Capital is free to use, but they also offer wealth management services for a fee.
YNAB (You Need a Budget) is also a good option for tracking your spending as well as budgeting for future expenses and goals. They offer a 34 day free trial, then it’s $11.99 per month or $84 for a year when paid in one lump sum.
Both programs require some time up front to enter account info, set up spending categories, and so on. I’m still in the early days of using both (I signed up for both to compare and contrast what they offer). But right off hand, despite the fee, I’d say YNAB is better for those wanting to really see where their money is going. I feel like there’s a lot more detail available in YNAB. I’ll do a more in-depth comparison soon.
Ideally, you should talk to your spouse or partner and see if you’re on the same page regarding getting yourfinances under control. If they’re not ready yet, go through the next steps and then present the information to them.
2. Figure out how much you’re spending in each category.
- rent/mortgage
- utilities (electric, gas, water, etc)
- car payment(s)
- renters/homeowners insurance
- car insurance
- food (groceries)
- restaurants (anything not made at home)
- gas for your vehicle(s)
- internet
- phone/cell phone(s)
- cable/dish
- clothing
- entertainment
- sports fees/dance or music lessons/etc
- charitable donations
- savings
- life insurance
- health and dental insurance
- other (add categories that fit your spending habits)
3. Evaluate Your Budget
Once you know how much you’re spending on each category, evaluate your budget as a whole. Are you spending more or less than you are earning? Are you happy with your spending in each category? Were there any unpleasant surprises?
4. What Can You Change?
Narrow things down a bit now, and go over each category. Is there anything you can do to reduce the amount you spend on each category? Can you change service providers or carriers, cut back on eating out, find free forms of entertainment for the coming months, etc? Can you eliminate one or more categories altogether?
Since many of us are practicing social distancing, your spending habits are probably changing. But this could be a good thing. If you previously found yourself running to the grocery store (and overspending) every other day or doing something else that sabotaged your budget, it’s a lot harder to do those things right now. Quitting habits cold turkey isn’t easy, but it can be effective. Just be sure you aren’t substituting online spending for in-person spending.
5. Can You Change Your Payment Method?
If there’s a category you’re having a harder time reining in, consider how you are paying for the items in that category. Do you just hand over your credit card every time you go to the store and hope you’re somewhere close to your budget at the end of the month?
Try switching to the cash envelope system for those categories that you struggle with and tend to over-spend. Label an envelope for each category, decide on an amount for each category, and put that amount of cash in each envelope. Once the cash is gone, it’s gone until your next paycheck. Seeing the money you have available and knowing it needs to last a specific amount of time can help you rein in your spending and develop better habits.
If walking up and down the aisles is too tempting, leave the kiddos home, or try ordering online. I prefer to shop at Kroger, and while they usually charge a $4.99 fee for pickup, I more than save that much by not wandering the aisles, making impulse purchases. Even better, I can track my cart total and click on digital coupons. Other stores may not charge a fee at all, so be sure to check around.
Right now there may be longer waits than usual (last time I tried to place an online order with Kroger the next available opening was a week out) and missing items, but if you plan ahead, grocery pickup can still be a valuable tool.
If your spouse is reluctant to jump on the budget bandwagon, this is a good time to present your findings, your proposed changes, and the benefits that will come from making those changes.
6. Keep Going and Celebrate Your Successes
Continue to track your expenses and make sure your spouse or partner is aware of what the budgeted amount for each category is. Check in with each other regularly tomake sure you’re not over budget and to celebrate your progress towards your financial goals. If you’re single, an accountability partner, in the form of a supportive friend or family member, can help you stay on track.
Divide your goals into manageable chunks that can be achieved within one to two months.Make a chart that you update each paycheck with the progress you’re making on achieving those goals. Be sure to put it somewhere you’ll see it often for a little visual motivation. As you reach each benchmark, celebrate your achievement! As you to start to see progress, you may be able to spread those benchmarks further apart, but do what works for you to help you stay motivated as you work towards achieving your financial goals.
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Do you have any other ideas for getting your budget under control? Please share them!
