This post was written by Heather Burgette, MBA, employee financial educator, Parkview Health.
Budgeting often gets a bad rap for being restrictive, time-consuming and even confusing, but for those who have found a way to make it a regular habit in their lives, they’re reaping the benefits, including:
- Finding wasted money
- Aligning priorities
- Reducing stress
- Controlling spending
- Growing savings
- Meeting financial goals
While these are all incredible benefits, we all know that creating a new habit and being consistent in that habit can be a challenge in any area of our lives. A Gallup poll showed only:
- 32% of Americans maintain a household budget
- 30% have a long-term financial plan that includes savings & investment goals
- The average American spends less than 4.5 hours a year with scheduled time on their calendar for finances. [1]
Now is the time to put in the work and create a consistent habit for you and your household. It can seem intimidating and overwhelming, leaving many to wonder where to start and how to make a budget stick. Here are four steps to set you down the path to success.
STEP 1: Mindset
First, you need to rework your mindset around the word “budget.” Only you know what comes to mind when you hear that word. Here are a few strategies to help change your thoughts about budgeting:
Your thought: Making a budget will take control away from what I want to do.
New mindset shift: Making a budget gives me control over my money so that I can do what I want to do.
Your thought: I have already blown my budget. The whole month is ruined. Might as well spend whatever I want.
New mindset shift: I forgive myself for this misstep, and I will put a plan in place today to be more disciplined with my money. I can stick to my budget.
Your thought: I need (insert item or experience here) to be happy.
New mindset shift: My happiness does not stem from possessions or experiences. My happiness comes from within.
STEP 2: Fresh start
Every month is different, so each month needs to start with a new budget. It doesn't matter if you use paper, a spreadsheet or an app, you must schedule a time to sit down and look at the upcoming month. Whether you decide to work on it every week or every other, the key is to schedule it and spend time focusing on this vital aspect of your life. Be sure to pick a date and time you know you’ll be well-rested and able to concentrate. For example, 10 p.m. isn’t a great time to work on your budget, especially if you’re doing it with your spouse. Sunday afternoons have worked well for my husband and me for the past 11 years. No matter what you choose, find what works for you, then schedule it. Put it on your calendar and adhere to it. Trust me, your future self will thank you.
STEP 3: Get organized
It’s hard to create and stick to a budget if you are disorganized. Your budget should have four categories:
- Income: What’s coming for the month? Try to estimate as best you can.
- Expenses: Housing, utilities, minimum debt payments, groceries, gas, gifts, school lunch money, and more should be listed here. The expense category is where you look at the calendar to anticipate your expenses. If you have a deficit or negative balance, you will want to go back through and make cuts to for the month.
- Debt: All debt, excluding your mortgage, should be listed in one spot with company, name, minimum payment, total current balance and interest rate. Making a list ensures that you can begin to plan how to pay down your debt while keeping more cash in your pocket.
- Savings: It is possible to make it happen, but it takes focus, effort and telling yourself “no” at that moment. Whether it’s for retirement, a family vacation, emergencies, appliance replacement, a family car, anniversary dinner or a weekend trip with friends, having savings is incredibly satisfying. You can feel proud of yourself and enjoy the experience of knowing you can pay for these items in full.
STEP 4: Your why
Let’s face it. Budgeting isn’t an easy skill or simple habit, but as someone who’s done it for the past 11 years, it’s 100% worth it. You work hard for your money and budgeting improves your relationship with it by saying, “This is what I would like you to do this month.” That’s right. You decide. A key success factor to regular budgeting is having a strong “why.” Only you can determine what that is and how it will keep you moving forward, one choice at a time.
Lastly, if you’re looking for help and not sure where to start, try reaching out to a financial professional or contact your Employee Assistance Program, if your employer provides these services.
Sources
[1] Debt.com
