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? This may lead you to ask, “How can I learn to budget my money wisely so I can save more?”
Start with a written plan. While that may sound daunting, the effort will make you aware of the places in your budget where you may not be acting as wisely as you could. 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 by looking at your big expenses where you can potentially save more money faster.
Maybe you could work to reduce your mortgage interest rate or rent payment, auto loan, groceries, cable subscription and of course 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 budgeting wisely is ensuring that you pay your bills on time. By using technology often available through your bank, you may be able to easily set up automatic payments and avoid forgetting to pay bills.
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This way, any time you look at your calendar, you will see the upcoming bills that are about to be withdrawn from your bank account or for which you need to arrange payment.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
- 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.
Ready to tackle your debt like a pro? Read How to Manage Debt