“Beware of little expenses; a small leak will sink a great ship.” ~ Benjamin Franklin
Do you often find yourself under financial stress, especially towards the end of the month? It is quite common to have a hard month once or twice a year, but if it’s something you experience daily, it’s a problem that needs attention. The good news is that all you need is ‘budgeting.’ Yes, a carefully planned budget could solve most of your financial worries. In fact, a majority of Americans consider budgeting a step towards being a financially responsible adult. However, only 41% of adults in the US create a budget, which answers why Americans have a saving problem. If budgeting is something you struggle with, here are some tips for mastering budgeting and saving money in the long-term.
So you read an article about the benefits of budgeting and created a budget for the ongoing month. Three months down the line, that budget doesn’t seem to be working anymore, and maybe it’s not worth the effort. Several people complain about the effectiveness of a budget, especially when starting. What they fail to realize is that their financial commitments are likely to vary every month; therefore, the same budget won’t be effective all the time. Budgeting is a monthly activity, and it is critical to plan afresh at the beginning of the month.
A need is something that you must have in order to survive, whereas a want is something that you’d be happy to have, but it isn’t critical for survival. Most of the people confuse their needs and wants, and often end up splurging. If your goal is to build long-term wealth, a little financial restraint will go a long way in achieving it. Your needs include a roof over your head, healthy food and water, and access to primary health care or hygiene products. So the next time you see that GOT or Avengers t-shirt, simply think about your long-term goal; your own house, investment property, or wealth creation.
Everyone has long-term and short-term financial goals. A long-term financial goal could be saving enough money for the downpayment of your home, whereas a short-term goal could be paying your credit card debt. Whatever your goals are, your monthly budget should align with these financial goals. It is best to be realistic with your goals; otherwise, you’re likely to give up at the first sign of failure.
With one-click shopping, swiping, and many expenses ready to eat away your income, it could be challenging to monitor daily spending. It is time to use technology to help you save more money. Apps like Splurge Alert use location tracking to stop users from entering particular stores such as shopping centers, Starbucks, and other guilty pleasures. Additionally, the app sends a text alert to the user’s Splurge buddies, who can intervene and save you from spending. There are other apps that alert the user once their bank balance goes below a pre-defined limit. Having these apps could help with overspending and curb unexpected expenses.
If you have a cookie jar to empty your pockets every time you return from grocery shopping, you’re on the right track. However, there is no guarantee that this money will end in your savings account. More often than not, we end up spending the money on unnecessary products or services. Micro-investing apps like Acorns can do the trick for you. These applications round-up your spending to the nearest dollar amount and invest the difference in a portfolio you choose at the time of registration. You can start investing with amounts as low as $1 and set daily saving targets. These applications are useful to get you started. The trick is to increase your contributions as you get comfortable saving larger amounts.
Another favorite money-saving tactic that financial experts advise is to use cash for discretionary spending. We all are culpable when it comes to certain guilty pleasures; let it be those Jordans or the latest iPhone. The trick is to use cash whenever such urges occur. The chances are that you’ll be more cautious when paying in cash for such splurges and are quite likely to quit spending after a couple of weeks. There is no shame in using good old-fashioned cash for daily expenses too.
It is quite common to get it wrong in the first couple of times. People often go crazy when they end up spending more despite having a budget. Understand that when you create a budget for the first time, you are more likely than not to miss an expense or two that will eat through your savings. The solution is to revise your budget if it’s not working. Identify any expenses that you didn’t account for and change your budget. It is best to revise your budget instead of giving up on it altogether.
Financial discipline is critical for long-term wealth generation. However, it doesn’t mean that you should deprive yourself of every pleasure and go ultra frugal. Instead, you should keep a budget for occasional splurges and enjoy the money you work so hard for.
Good luck and let us know which of these tips suit you the most.