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Consolidate Debt

How to Budget Your Money Wisely in 3 Steps

Woman paying bills online

Some say the secret to building wealth isn’t necessarily how much you make, but rather how much you save. Essentially, are you being smart with what you have? Are you managing your money and your budget wisely so you can save more? Maybe you’re asking yourself, how can I do better with my money?

We suggest you start by sitting down and making a list of all the money that comes in, after taxes, and what goes out. That list will help you easily identify necessary adjustments. As the author and management consultant, Peter Drucker, explains: “What gets measured, gets improved.”

These three simple steps could help you take control of your finances and take a smart approach to budgeting your money:

1. Start with the big expenses

While small habits such as a daily latte can absolutely add up over time, it’s better to start by looking at your big expenses for ways to potentially save more money faster.

You might be able to reduce your mortgage interest rate or rent payment, auto loan, groceries, cable subscription, and or any outstanding debt payments.

Another responsible way to reduce your monthly spend might be to consolidate higher-interest credit cards and other debt to a personal loan. You may be able to save on interest which would contribute to managing your budget wisely.

Plus, many personal loans have a fixed rate and set regular monthly payment. One easy-to-remember payment could help keep you on track with your budget.

Jeff Rose, a certified financial planner, has additional tactical budgeting suggestions to support accomplishing your goals:

2. Automate payments and bills or put them on the calendar

Part of good money management is ensuring that you pay your bills on time. This is where another list could come in handy: You can set up a “bill payment calendar” and list each payment on the date that it’s due.

This way, any time you look at your calendar, you will see the upcoming bills that are about to be withdrawn from your bank account or for which you need to arrange payment. Get started by inputting items like:

  • Home mortgage or rent payment
  • Utility bills such as gas, electric and water
  • Car payment
  • Credit cards
  • Car and health insurance
  • Television/cable
  • Mobile phone
  • Gym
  • Personal loan

By using technology often available through your bank or the payee (like your gym or cable provider), you may be able to easily set up automatic payments and avoid forgetting to pay bills.

3. Monitor your budget every month

If you have a significant other, it might help to manage your money wisely together by having a specific time each month you review your budget.

If you’re single, consider finding an accountability partner (a “budget buddy”) to discuss with such as a parent, sibling, or close friend.

Managing your money wisely can lead to a healthier retirement, fun vacations, and less anxiety knowing that you are in control of your budget instead of your budget controlling you. Here are some questions you can go over as you discuss your budget each month:

  • How much did I make and how much did I spend?
  • Is there an opportunity to lower the cost of my debt?
  • Am I aware of all expenses that are due this coming month?
  • Is there an area of my budget that could be improved? If so, what is my plan of action?
  • How did I do on last month’s action items?

A budget buddy can keep you honest about how you’re doing with your promises to yourself, and can offer support and suggestions to keep you on track. Sometimes just talking about good money management with someone else can make it feel less overwhelming and more achievable.

To recap: start big, automate, and monitor. Learning how to manage your money and budget wisely can help you define and reach your financial goals. Start with these three steps to build your confidence and create a financial review habit.

Next up: Think about your debt. Do you have some higher interest debt you’d like to save money on? Or maybe a number of different payments you’d like to consolidate into one so you can keep better track of what you owe and how you’re managing it? We’ve got you covered with some tips for paying off your debt faster. Read More