Are you tired of living paycheck to paycheck? Do you feel like you can’t make a dent in paying down debt? Are you unable to develop a beneficial savings account? You might need to consider making a budget.
Budgeting is a sure-fire way to help you become familiar with your finances. Creating a budget also helps you develop a relationship with your money. One of the best benefits of budgeting? It can get you out of debt – as long as you stick to it for a while.
We know, we know… making a budget sounds about as much fun as cleaning the house. The good news is that your budget doesn’t have to be an awful experience – it can really help you!
What is a Budget?
A budget is an estimate of income and expenses for a set period of time, according to Dave Ramsey. Budgets are assigning your money to go towards things you have to pay for, like your mortgage and car payment. It also gives your room to assign money towards things like eating out at restaurants.
Zero-Based Budget
If you’re wanting to pay off debt fast, Dave Ramsey recommends the zero-based budget. A zero-based budget is to make your income minus expenses equal zero. This means that your giving every dollar and cent a job. You tell your money where to go.
For example, if you pay all of your expenses for the month but still have $350 left over, then you’re budget is incomplete. You have to tell that $350 where to go. In this case, it’s beneficial to throw it towards debt or savings, rather than thinking you have that $350 to go shopping on. When you start sending that excess to debt, you will be amazed with how much faster you’ll be able to pay it off. According to a survey from Financial Peace University, those who do a zero-based budget pay off 19% more debt and save 18% more money. This happens just from telling your money where to go. If you start now, you’ll see your debt go down and wealth go up faster than you think.
Cutting Back on Expenses
If you are new to budgeting, you might not think that there’s anywhere you can make more room in your budget appear. If there’s a will there’s a way, here are some tips on how you can make a budget and help cut your monthly expenses.
- Write down your expenses – this will help you see where your money is going. It’ll also draw to your attention where you’re overspending and where you can afford to cut back.
- Quit the coffee – the quick morning trips to get a cup of coffee add up — fast. If you are committed to budgeting and saving money wherever possible, this is a great way to start. Making this at home could save you around $30 a week. Do the math and see how much that is a year!
- Get thirfty – shopping in thrift stores allows you to still update your wardrobe, but at a way more affordable cost. You can find designer brands for much less than you would buying it new. You can even find home decor and more in your local thrift stores. When you do this, you will save so much money (and might not ever go back to paying full price!)
- Go generic – most of the time, generic brands are the exact same as big name brands, but you’re not going to be paying more just for the name recognition and pretty branding. Don’t believe us? Check the labels on a generic brand to a big-named brand you love. They will be similar — if not the same.
- Meal prep – a good portion of our income goes to food. If you eat lunch out everyday while at work, you’re spending a good chunk of your paychecks on salads and sandwiches. Try cooking at home and preparing your lunches for work ahead of time. It’s more time consuming, but the money saved makes it well worth the time.
- Compare prices – it’s time to start shopping around on bills and everyday purchases that seem a little expensive. By going around the corner to a cheaper gas station to switching utility companies, the savings can add up fast just by you taking the time to compare prices. Even look at your car and home insurance – you will more than likely be able to find another provider that costs you less.
- Drink water – this sounds about as much fun as making a budget, right? However, when you’re out at a restaurant, skip the fancy sodas and drinks. Order water! In most establishments, water is free. Saving $2-$20 on a drink per trip will add up each month. That’s more money in your pocket!
- Save loose change – the pennies you have laying around take a while to add up, but eventually they do. Keep your loose change in a jar in your car or on your kitchen counter and see how much you’re able to accumulate her time.
- Sell things you don’t use – You probably have several things within your home that you haven’t looked at in months or years. Clear the clutter and sell your unwanted things on sites like OfferUp or Facebook. $20 here and $20 there gives your budget a buffer and it only costs you your time.
- Don’t take out anymore loans – when you’re in debt, loans aren’t your friend. You’ll accumulate interest and they end up doing you more harm than good. Use your income and don’t buy what you can’t afford.
- Cancel your gym membership – that fun-filled spin class might be your favorite workout, but when you’re in debt you can get your exercise in at home. You can end up saving over $100 a month. Imagine throwing that towards your debts.
- Use cash only – a popular budgeting tip is using cash. With each paycheck, you assign a certain amount of money towards different things each week. You can separate the cash into different envelopes labeled things like: groceries, fun money, car maintenance, home repairs, and more. Once you use the cash you assigned, you can’t spend anymore. The next paycheck, you replenish the envelopes. If you’re interested in learning more about the cash only system, Inspired Budget is a great resource.
- Get a side hustle – if you are always at a coffee shop, see about getting a part time job there! If you’re a good writer, try finding a writing job you can do during the evenings. These are meant to supplement your full time gig and give you a little extra money to have to throw towards your debts and more.
With budgeting it can feel like you’re having to cut back on the things you love – but you don’t have to! You can manipulate your budget to make room for things you enjoy, while saving money and paying down debts. The beauty of budgets is that all of them are different. Yours will look different than the budget your parents, friends, or coworkers use. You are able to change your budget each month until you can find one that works for you and your financial goals.
Lending Studios tip: don’t look at your budget as not allowing you to spend money, think of it as showing you where you have the money to save and spend. Budgets don’t have to prevent you from living life to the fullest, they’re there to help you achieve financial freedom.
