4. Separate WANTS vs. NEEDS
When creating a budget, you’ll need to account for all your expenses. When reviewing your expenses, consider which ones are wants and not needs. Spending too much on wants can add up to a lot of debt very quickly. So ask yourself the tough questions: Is this expense necessary? Does it help me with my goals? What would happen if I lived without it? Is there an alternative or more cost-effective option? If you’re being honest with yourself, chances are there are some expenses in your budget that could be eliminated entirely, or drastically reduced so that you can redirect money to paying your debts off faster.
What Are Your Bad Habits Really Costing You?
5. Plan for Irregular Expenses
People often forget about those expenses that only come up once in awhile. Irregular expenses might include things like car repairs, haircuts, vet bills, membership fees, gifts, festivities, or even clothing. By planning for seasonal or periodic expenses, we can eliminate the need to use credit or money that was meant for something else. Consider opening a separate savings account specifically for irregular expenses and set aside money every pay period into this account for your irregular expenses. This will help you be proactive instead of reactive.
6. Automate Your Finances
Most financial institutions offer online automated banking options that can help make budgeting and saving automatic. Creating automatic deposits into accounts every pay period can help create good saving habits and assist in keeping track of your expenses and payments. Check with your financial institution for options available to you.
7. Pay Yourself First
Treat your savings like an expense or a bill and put it in your budget as a regular ”payment” instead of waiting until you have money left over to put away. Most people find a way to spend any extra; however, paying yourself first makes savings a priority equal to that of a bill payment.