Remember making a budget when you were just getting started in life as an adult? Thinking back, you realize you had no budget and you wonder how in the world you were able make it on the income you were making. Trouble is, today, you find yourself making more money and you STILL are having trouble making ends meet. How is that even possible? It is likely because you either do not have a budget or you have a budget and you have no idea how to stick to it.
Many people just amp up their spending as their income increases over the years. When you have a budget in place, the decisions you made to establish your budget help steer your spending choices. Investing some time in putting a reasonable budget together will help get you on the path to meeting all your financial responsibilities and reducing some of that crazy stress of trying to stay current on your bills. Plus, you will have savings to help when the unexpected occasional crisis arises.
Making a Budget and Sticking to it
Before you can create a budget, there are a few things you need to know first.
These steps will help you gather the data you need to help you create your budget:
- Track your spending. If you use your debit card for most purchases, it is likely your financial institution has an app in the online banking portal to run reports that, in most cases, will allow you to see what you are spending and on what. Most of these apps divide your spending automatically into categories and some even allow you to edit these. If you do not have access to this, simply begin a pocket log of everything you are spending money on and the amounts for a month or two.
- Be prepared to become more aware of your spending. Preparing your budget will help you begin to understand your habits. In many cases, people do not realize how many “empty purchases” they make on a regular basis. The awareness will allow you to make more conscious decisions about your money and provide clarity rather than simply having an “idea” of where your money is going.
- Have a talk with yourself. What do you really want? After you have become aware of what your spending habits are, you can then begin to really analyze if you intended to spend money in the way you did, or were you making quick, mindless decisions that left you wondering where your money went. When you learn to decide what is important to you and your happiness, you can make better decisions about your spending choices.
- Assign priorities to your income. Be reasonable! The more realistic your budget is, the more likely you will be to follow it. When you have decided that you want to save more and spend less at Starbucks, your budget will guide your choices the next time you pass by a Starbucks. If your budget allows you to treat yourself once a week, you will spend that money without guilt or concern because YOU own the budget and YOU made the choice.
As you begin to lay out your priorities while making a budget, a few tips will help steer your work. First, pay yourself first. Even if you can only save $10, make sure you put that $10 in savings before you pay any other bills. If you can save more or as you pay off bills, you find you have more discretionary cash, you can (and should) increase what you pay yourself over time. Second, as your life changes, your priorities also will change. If you will soon be owning a home, you may wish to spend more on furnishing your home than on entertainment. A budget is a living plan that will change with you and your life. Finally, beware of spending creep. If your income begins to climb, be careful to avoid the mindless spending that you aimed to rein in when you created a budget.
Get Help With Your Budget
If you are heavily in debt and are unsure what you should pay first or are wondering how to proceed, getting help in prioritizing spending can literally turn the light on to a dark financial picture. Contact us today. McCarthy Law can help you learn the priorities that will impact the timeline of getting your spending under control and getting debt in shape. We can even negotiate reductions in your debt picture without bankruptcy. Call us today to schedule your appointment to learn more about reducing your debt and creating a budget that can set you on the right course.
Kevin Fallon McCarthy
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