Ever look at your bank account and wonder where all your money went? We’ve all been there.
It’s a new year, so here are some tips to help you step up your game and build those budgeting muscles. You’ll be empowered to take control of your money and use it for what you want.
Whatever your prior experience with budgeting, our tips can help you raise your game, from basic budgeting through what you should do if your budgeting game is already on point.
So, how financially fit are you when it comes to budgeting?
Level 1: The struggle is real
Everyone has to start somewhere — but it doesn’t have to be overwhelming. There are tons of basic tools out there that will help you ease into budgeting.
- Mint: A powerful app for managing your spending, including bill reminders and warnings about how close you are to going over your budget for the month.
- You Need a Budget: Software you can use to make a more complex budget.
- Level Money: A basic overview of how much you have left to spend for the day, week or month.
- Spending Tracker: A simple expense-tracking app.
- Wally: See where you’re spending money and how much income you have, all in one place.
- A spreadsheet: Make your own tracker in Microsoft Excel or Google Sheets.
Use any one of these tools to set up a simple budget. Then, get really crazy and create a more detailed framework. Check out this walkthrough by one of NerdWallet’s trusted financial advisors to get started.
Level 2: Lean, mean,
cost-cutting machine
Now that you know where your money is going, it’s time to cut the fat. That means real talk about what you actually need to buy and where you can cut costs.
- First, make a list of your essentials. You know, things like food, rent and utilities, plus that emergency fund.
- Next, create a list of “wants” — things like eating out, shopping and grabbing drinks with your squad.
- Take a look at how much you’re spending on the needs vs. the wants. If you don’t have enough to cover your needs, it’s time to cut back your spending on wants.
Even if you’ve got enough money to comfortably cover both your needs and wants, consider what you could be doing with your “want” money. Putting some of that toward retirement will be better for you than buying those new shoes that you’ll toss in the back of your closet after a month.
Level 3: Buff budgeter
You’ve mastered spending and cash flow, so you can treat yourself: Create the perfect plan to save up for something you want. Backpacking trip in Europe? A new phone? Whatever you decide, here’s how to buy it without racking up credit card debt.
- Figure out how much you need, including taxes and fees. If you’re not sure exactly how much you’ll need, or if the cost could change by the time you have to pay, round up. Extra money is never a bad thing.
- Divide that amount by the number of paychecks remaining until your expense. If the amount is unaffordable with your budget, consider either postponing the expense to give yourself more time to save or looking for ways to increase your disposable income.
- Now comes the hard part: You actually have to put aside that money each paycheck. Set up an automatic transfer to a high-yield savings account to occur a day or two after you get paid. (In case there’s a delay of funds, you don’t want overdraft fees.) That money might as well be earning as much interest as possible for you.
Ready to get financially fit?
Setting aside the time to actually create a budget can be tough — and it’s not exactly a fun way to spend a Saturday. But knowing where your hard-earned money is going means you can find ways to afford both what you need and what you want.
- The next step: Get Your Credit in Shape
- More tips: Get Financially Fit in 2016
Heather Yamada-Hosley is a content strategist at NerdWallet, a personal finance website. Email: heather@nerdwallet.com. Twitter: @Curious_Heather.
Top image via Shutterstock; barbells via 530 Media Lab.
from NerdWallet Credit Card Blog
http://www.nerdwallet.com/blog/finance/build-your-budgeting-muscles/
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