Did you know that nearly 70% of Americans have less than $1,000 in their bank accounts? This chronic undersaving and underbudgeting by the majority of American families is dangerous.
If you don’t have enough money saved for family emergencies, you could find yourself in a hole of debt quickly. However, budgeting can be difficult if you’ve never be introduced to the concept of saving or budgeting.
To learn more about budgeting and saving, keep reading. Using our simple tips for budgeting can help you and your family keep enough money away to face any emergency that comes your way.
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1. Devote Every Cent
When you’re looking to budget your money, you need to make sure that every single cent of income is accounted for. This means that every cent needs to have a designated use.
You shouldn’t mark every single cent as a kind of expense, but you should mark every cent as going somewhere. For example, many people keep 20% of their income for their savings account. Keep in mind that this isn’t an outgoing expense, but it’s still marking that 20% of your income for something useful
If you have inconsistent income, working in percentages may be best. 20% of your income one week may be different than 20% of your income another week.
2. Budget With Your Family (Or Roommates)
If you live with another person or multiple other people, you should include them in your budgeting routine. If you’re making monetary decisions together, you should have a budget together, even if it’s only for housing decisions.
Having your significant other or your roommate involved is important. Not only can they help you make great budgeting decisions. They can also help keep you accountable for the budget that you make.
Make sure to involve whoever may be affected by your budget.
3. Start With the Essentials
When you’re actually making your budget, you should start by allocating your money towards the essentials first. This means that you should choose how much money you should be spending on food, rent/mortgage, medications, utilities, and other essential categories.
Write down what you need to spend money on. When you’re doing this, you need to make sure that you’re identifying what is actually considered a need rather than a want.
Once you’ve written this down, think about the average amount of money that you spend on these categories and make this a starting point for your budget.
4. Focus On Paying Off Debt
Allocate a certain amount of your budget every month towards paying off any existing debt that you may have. This ensures that you’ll pay less on this money over time.
By contributing towards your debt, you’ll ensure that less interest is counted towards this money over time. Basically, you’ll pay less on the money that you owe.
Don’t let your debt accumulate and build. Try to pay it off as soon as possible.
5. Make Meaningful Goals
Make goals about what you want to do with your money. How much do you want to save? How much do you want to invest?
Think about what you want to do with your money. Whether you want to invest in your retirement account or save for an international trip, write it down.
Write down the amount you need to meet your goal and figure out when you want to meet that goal. Using this information, you can figure out how much you should set aside for this goal.
6. Be Careful With Credit Cards
Credit cards can be deadly. If you have debt on your credit cards, you need to start using them better than you were.
If you have a credit card, you need to make sure that you’re not spending more than you actually have. Credit cards should be used to build credit. Nothing more.
You never want to use a credit card to pay for things that you couldn’t normally buy using cash or a credit card. That means that you shouldn’t buy anything that you couldn’t buy using your debit card right now.
If you don’t have money to buy necessities, you can use your credit card as a way to put off paying the price for those necessities since the due date would be later. However, you should be careful with how many times you do this.
You can accidentally spend more than you make and set yourself up for financial failure. Always proceed with caution when you’re using credit of any form.
7. Revisit Your Plan Monthly
Your financial situation is bound to change from month to month. This is why you need to take a look at your budgeting plans every month.
For example, you may have a child. Now, your financial priorities need to be changed. This applies to many different situations, like a move, a marriage, a lost job, a gained job, an increase in income, a decrease in income, and so many more.
It’s rare that your financial situation will stay exactly the same from month to month. You need to evaluate if the amount of money you’re making is changing, if your priorities are changing, and if your needs are changing.
It’s likely that your budget could shift tremendously, especially if you’ve gone through a major life change.
Just make sure that your budget is still relevant to you. You can completely rebuild it using our tips or simply skim through your current plans. However you do this, double-check your plans to ensure that you’re following our number one tip: devote every cent.
Learning More About Budgeting
Budgeting is one of the most important skills for anyone to learn. Whether you’re an individual or have a family, you need to learn how to manage your money well.
To learn more about budgeting and money management, check out the rest of our personal finance learning center. We recommend that you look at our guide to smart, safe investing options for growing your money.
If you’ve found that you’re too far in debt and you need help now, you can look at our online loans here.