When it comes to New Year’s Resolutions many people want to work out more, or quit a bad habit; but most people want to save more money or follow through with a budget. We understand this and we want to help. Follow our practical budgeting tips and watch as you begin to reach your financial goals.
- Ask “Why Do I Want to budget?”
By asking yourself this question, you are able to identify your short-term and long-term savings goals. For example, maybe your family has an upcoming summer vacation and the purpose of your budgeting is to save more money to help pay for some travel expenses. Or, maybe you’re recently married and you have the dream of becoming a new homeowner. Once you know why you are wanting to budget, you’ll need to gather more information regarding your spending.
- Track Your Spending
There is a difference between fixed expenses and variable expenses. Fixed costs are going to be payments that are the same each month, such as your monthly rent or insurance. Your variable costs are going to be things that change monthly, like your grocery expenses, entertainment, or when you put gas. You can’t change those fixed expenses, but if you keep your eye on your variable expenses, you can find better opportunities to save money. If you eat out four to five times a month, you can save money by reducing the amount of times you eat out. Instead of buying that $7 Starbucks coffee, you can save money by making coffee at home. These are quick and effective tips to slowly see more money in your pocket.
- Have a Separate Account for Your Savings
In order to help with your short-term or long-term savings goals, it is a good idea to have a separate savings or club account to put that additional funds in. If your goal is to save $100 a month, instead of leaving it in your checking account, transfer it to a savings account so you know that money is already set aside. Additionally most savings accounts offer interest, which is a great way to make more money than it would sitting in your checking. If your goal is to have an emergency fund for unexpected expenses (flat tire, hospital bill, etc.), it is also smart having a separate account.
- Prioritize Your Categories
This is similar to tracking your spending, but it allows you to decide which spending categories are most important to you. In most cases those “necessities” come at the top. These may include your rent/mortgage, car payment, or groceries. Then come your wants such as entertainment, subscriptions, and shopping. By ranking where your priorities are, you can see what categories you want to have more of your monthly budget in.
- Choose a Plan That Works for You
We know that there is not a blanketed budget that works for everyone. It is important to find a budget plan that works best for you. If you don’t know where to start, we have gathered together a few easy budgeting plans that you can start today.
The 50/30/20 Rule
The 50/30/20 rule encourages your budget to be spent on three categories:
- 50% of your net income is spent on your “needs.” These are your fixed costs such as rent/mortgage, bills, and even variable costs such as your groceries.
- 30% of your net income is spent on your “wants.” The majority of your wants will be variable expenses like going out to eat, clothes shopping, and vacations.
- 20% of your net income goes toward savings or toward paying off debt. This can be for an emergency fund, retirement, or just paying off those credit cards.
The Zero-Based Budget
A zero-based budget is a little bit more detail-orientated approach. It assigns every dollar a job. At the end of the month, all income minus all expenditures should equal zero. This means being very aware of all your transactions as they happen and knowing exactly how you spend money on your fixed expenses, variable expenses, and how much you’re saving each month.
Create a Contingency Plan for Your Budget
Life happens. There may be a few hiccups along the way. So don’t beat yourself up when things get complicated and you can’t follow as closely as you would like to your plan. By creating a contingency plan, this allows you to remain motivated and continue focusing on your budgeting tips.
Contingency plans may include:
- Saving for an emergency fund as part of your budget. By setting aside 3-5% of your net monthly income, you will slowly see that emergency fund grow for the unforeseeable circumstances.
- Create a fallback budget to refer to in times of emergency. This fallback budget can cut out everything that is nonessential for everyday life. This frees up some of your income to use in time of need.
As an additional resource to help you with your budgeting tools, we have created an interactive Excel Spread Sheet to help you with keeping up your income, expenses, and your savings by inputting and tracking your finances.
Your Money at Legacy Credit Union
If you’re looking for the best way to put all of these budgeting tips into action, look no further than Legacy’s checking accounts. Through our digital banking app you can keep track of each and every transaction, make money transfers to your club account, or even set up bill payments. With our branches you can set up as many club accounts as you would like in order to meet your financial goals. Legacy also has a Certified Financial Counselor that can offer any additional help
Your financial wellbeing and getting the most out of your money are important to us. We want to help make your money work for you in 2023!