Practical budgeting tips to help you manage your finances – analyze your income, spending & save money.
This Budgeting Tips To Manage Your Finances & Save Money post is written by Mrs. Miller of Millers On Fire. Read more about her below.
2020 is a leap year and it sure did leap into unknown territory. If you started this year with big plans to get your health, mind, and money right, how is all that going?
Honestly, you won’t get any judgments from me.
The uncertainty of these crazy times had me glued to the TV, watching daily news briefings from our governor. I scrolled endlessly on social media wanting as much information as possible. But the constant consumption of dire news left me paralyzed. The news of what was happening in the world left me utterly shocked.
Businesses have closed their doors, stay-at-home orders are in place, and with more people working from home than ever before we are all doing things differently.
If you are one of the 36 million people who have lost their jobs during this time, my heart goes out to you. In April alone, 20 million jobs were lost. We don’t know how long things will continue like this, but let’s find solace and remember, this is temporary.
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BUDGETING TIPS TO MANAGE YOUR INCOME, SAVINGS & FINANCES
If this crazy time in the world has you analyzing your income and spending, here are a few budgeting tips to help you create a financial plan to keep you sane.
A budget will help you prioritize your needs and wants.
Step 1: Analyze Your Spending
Before you set a goal for where you want to be, you have to understand where you are. This is probably the most tedious step, but once you get past this, it gets simpler.
Take the time to look at every debit and credit card purchase for the past three to five months. Log-in to every account and save and/or print each account statement. Included every credit card bill, every checking and savings account statement.
Notice the number of Amazon purchases, Target hauls, Starbucks purchases, and restaurant costs. How many times a month or a week are you making a grocery store stop. How many subscription services do you have?
It’s important to take inventory of every expense.
It’s easy to fall into the same patterns week after week, but not understanding your spending habits could be costing you hundreds or thousands of dollars a year.
Here are a couple of ways to review your spending:
- Print out every bill and use a highlighter to categorize the expense, i.e., grocery in green, clothing in blue, uber rides in purple, fuel in yellow, etc…
- If you are a spreadsheet nerd like me, use Excel or Google sheets to create a spreadsheet to catalog your expenses.
- Use a budgeting app
List your expenses in the order from the high priority to the lowest. It makes it easier to determine what must be paid and what can be put on hold or cut entirely.
Three Costliest Categories
The three categories that usually take up the bulk of our incomes are the cost of housing, food, and transportation. Tackling those three categories can make a world of difference.
A few ways to cut housing costs include downsizing, moving to a less expensive area, or renting out an extra room in your home. Yes, a roommate.
Food costs can be reduced by purchasing items in bulk at wholesale clubs if you have access. A trick I learned from a nutritionist to eat more healthily and cheaply is when at the grocery store, shop the perimeter first. Before you go down aisle 7, shop the produce section. Most of the processed, sugary and expensive food is in the middle of the supermarket. Avoid the supermarket aisles as much as you can.
Also, shop the sales. Most grocery stores have weekly sales. What I’ve noticed is that sale items tend to rotate every six weeks. If your favorite item is higher than usual, wait a few weeks and see if it makes the sales ad rotation.
I am ashamed to admit that I overspent on groceries for years and this led to a terrible amount of food waste. I would buy fresh fruit and vegetables that would ultimately go bad. I would shop with no plan of how and when I would use all of the items.
Meal prepping is a great way to minimize food waste and cut down on food costs. Be sure to shop your pantry.
Pro-tip: If you have kids, have them make a list of all the spices, canned goods, and all the items in your pantry. You may be surprised at how you can shop your own pantry once you take inventory.
Remember, make space in your budget for saving, investing, and paying down debt. Keep in mind, those sometimes forgotten annual expenses like vehicle registration fees and your Amazon Prime account fee.
Step 2: Create a Spending Plan
The word “budget” has some serious baggage attached to it. So instead make yourself a spending plan in order to stay on track.
Once you know how much on average you spend in each category, decide what are your absolute necessities. This should include food, housing, medications, and anything else you absolutely have to pay for.
We are talking absolute bare bone needs and nothing else. Other fixed expenses might include car payments and utilities.
Once you have prioritized your needs, it’s time to add your discretionary spending. Include those things that you enjoy having but you could live without. These variable expenses or discretionary expenses might include things like cable and clothing.
Challenge: Find substitutes for costly items. You may be surprised by how many free and affordable alternatives there are for things like entertainment.
What about moving date night to daytime brunch? Or switching vehicle insurance companies. We slashed our cell phone bill by using alternative cell phone carriers like Boost Mobile and Mint Mobile.
Sometimes It’s an Income Issue
The two most common patterns for people who are struggling with their budget is either they have a spending issue or an income problem.
If you have ruthlessly reduced your spending and still are having trouble making ends meet, increasing your income might be key. Side hustles are a great way to bring additional income when you are strapped for cash.
Don’t forget about seeking out information about resources that may be available to you like unemployment, food banks, and loan forgiveness programs.
Financial coaches are also a great option when you just need a look at your financial situation. Sometimes we have those blind spots and just need another set of eyes.
Perhaps, you have a job you love, maybe it’s time for a salary increase. When was the last time you negotiated a salary increase?
Did you know most salary increases come with a job change? If you don’t see room for financial growth at your current employer, it might be time for a job switch.
Step 3: Celebrate the Wins
Did you reduce your monthly grocery bill by $50? Paid off a credit card? Saved an extra $100 this month? It’s important to set goals and when you reach them, celebrate!
Be careful not to compare yourself with others. Personal finance is personal and your money journey is your own. You and only you can determine what success looks like. Celebrate the big and small wins.
It’s Okay to Pivot!
No matter how much you plan and budget, those unexpected expenses are bound to appear. Who would have thought that 2020 would have turned out the way it has?
Take a look at your budget a couple of times a month and make adjustments as necessary. If your grocery bill is a bit higher this month, try to reduce expenses in other areas like fuel or electricity costs.
Don’t forget to make room for those small luxuries. One of the reasons many fail at budgeting is they don’t give themselves space to have a little fun money.
It’s okay that not every dollar goes to pay bills. Leave space in your budget to enjoy life and spend on the things that bring you the most joy and value. Now I am not talking about luxury handbags while you are still paying off debt. Intentional spending is key.
Getting your financial life in order is possible.
But I urge you, don’t start with the math, start with the mindset. Focusing on the big picture and keeping your goal in mind can help you prioritize how you allocate your funds.
It’s not about saying no to a bunch of things, it’s about saying “yes” to one thing loudly. Maybe it’s getting out of debt, saving for your first house, paying for your child’s college education, or total financial freedom. Keep your “why” in mind.
If your income has been reduced it’s important to cut expenses and try to negotiate lower rates on your bills. Downgrading internet packages or negotiating better prices can be a tool in your expense cutting journey.
Decreasing expenses can be difficult. However, in times where every dollar counts, it’s important to be mindful and practice intentional spending.
The easiest way to do that is by creating a plan for every penny that you earn. Give every dollar a job and stick to it. Your housing dollars should not go into your dining our fund. Taking control is you telling your dollar how it will work for you.
Whether you’re planning for a dream vacation, your first home, or saving up for an early retirement creating a budget can help you reach your financial goals.
There is a difference between being on a budget and using your budget to achieve your goals!
If you’re looking for a free budget template, check this one out: Free Budgeting Template