Some say the secret to building wealth isn’t necessarily how much you make, but rather how much you save of what you make. Essentially, are you being smart with what you have? You may be asking, “How can I learn to budget my money wisely?”
A written plan will make you aware of the potential areas of your budget that you are not exactly being wise with currently. From that awareness, you can easily make the 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 looking at your big expenses where you can potentially save the most money.
These may include attempting to reduce your mortgage interest rate or rent payment, auto loan, groceries, cable subscription and of course any outstanding debt payments.
For example, consolidating multiple credit cards to a personal loan is a responsible way to budget your money because you may be able to lower your overall interest payment.
In addition, personal loans provide you with a finite payment schedule, usually of three to five years, at a fixed rate. One easy-to-remember payment could get you on track with your budget.
Jeff Rose, a certified financial planner suggests using tactical budgeting to accomplish larger financial goals and purchases:
2. Automate Payments and Bills or Put Them on the Calendar
By using technology often available through your bank, it’s a simple process to set up automatic payments so you don’t accidentally forget. You can also 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This way, any time you look at your calendar, you will notice additional bills that are coming up and about to be withdrawn from your checking account. Get started by inputting items like these to budget your money wisely:
- Home mortgage or rent payment
- Utility bills such as gas, electric and water
- Car payment
- Credit cards
- Car and health insurance
- Mobile phone
- Personal loan
3. Monitor Your Budget Every Month
If you have a significant other, it might help to budget your money wisely together by having a specific time each month you review your budget.
If you’re single, consider finding an accountability partner to discuss with such as a parent, sibling or close friend.
Being responsible with your money now 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?
Learning how to budget money wisely is your first step to reaching your goals. While it may not be easy, keeping it simple could help in the early going.
Think of it this way: start big, automate and monitor.