Alright ladies, there’s only a few more days left in the year. If you and your budget didn’t get along very well this past year, it certainly doesn’t mean you can’t get along for the new year. There are numerous reasons why you didn’t (or couldn’t) stay in budget, so don’t beat yourself up. There are always chances to try again with staying in budget.
Being knowledgeable about what’s hindering you from staying in budget can help you fix the problem. The CGS Team is sharing our top 5 tips for staying in budget, just in time for the new year. If you’re struggling to stay in budget (anytime of the year), then keep reading!
#1 Create a Buffer in Your Account
A buffer simply means a cushion. When applied to your checking account, it means always having an extra amount in your account at all times. For example, if your monthly bills total $1200, then your checking account should always have $1300. Meaning, there should always be a $100 cushion. A buffer is great because your monthly bills may fluctuate, and you always want to have enough money to cover them.
The best way to ensure your account always has a buffer is to overestimate your variable expenses. For example, your cable bill will always be the same amount, but your power and water bills will change from month to month. Whatever your largest bill amount was for the variable expenses, use that as a standard. Best case scenario is your buffer keeps growing. Worse case scenario is you always have enough in your account to cover your expenses and stay in budget.
#2 Have Funds Ready for Unexpected Expenses
I always recommend my clients factor a “miscellaneous” category into their budget. With all the moving pieces in our daily lives, it’s easy for expenses to slip through the cracks, especially if they are not recurring. Instead of scrambling when those unexpected expenses come in, always have money allocated for the unexpected.
Having a miscellaneous category in your budget allows you to put money aside for unplanned spending. This “miscellaneous” category should not substitute an emergency fund. The purpose of the miscellaneous category is specifically for those small, one-off expenses that don’t fall into any other budget category. Examples may include: one-time co-pays, a new pair of glasses, books for a class, and a donation to charity.
#3 Track Your Spending to the Penny
The best way to make sure you are staying on budget is to track your spending. I set my clients up on a daily spending tracker that is aligned to their budget. As their budget changes, their tracker changes. It doesn’t matter which tracking method you prefer, as long as you are actually following it.
You can use an app, a spreadsheet, write your spending down, balance your checkbook – whatever works best for you. Read 5 Reasons to Start Tracking Your Spending. If you aren’t tracking your spending, you don’t really know what money is going out. That means you won’t know if you are truly following your budget like you should be.
#4 Remember to Budget for Fun
One of the easiest ways to fall off your budget is by failing to factor in the things you enjoy (in moderation, of course). For example, if you know you love iced coffee from Starbucks but give yourself $0 for dining out funds, you are setting yourself up for failure.
Factoring in $25 a week for the things you enjoy won’t hurt your bank account, and it can help you stay on track with your numbers. You know that you get to enjoy the things you like, but you also know you have a limit to follow to ensure you reach your goals.
If you are extremely focused on building up your savings or paying off debt, you may not be able to factor much to your “fun” spending, and that’s okay. As long as you give yourself a little something and always remember why you need to keep it tight, you will reach your goals. Once you reach your goals, you can give yourself more spending flexibility.
#5 Use Cash for Discretionary Spending
Since you will be budgeting for fun and other discretionary items (think iced lattes, bar drinks, toiletries, grooming, shopping, etc.), you will know exactly what you can afford to spend on such items. When you know exactly what your limit is, you can pull cash for it. Using cash is a great way to give yourself a physical limit on spending. Once all of your cash is up, no more discretionary spending until the next payday.
Cash is also a great tool to help you think through your purchases, since you have to physically give it away. It’s a lot easier to swipe your card without feeling, than it is to hand someone a $50. I highly recommend using the envelope system. Each payday, pull the appropriate amount of cash for your discretionary categories and put it in an envelope. Only pull cash from the envelope when you have a discretionary purchase coming up.
Related: 5 Reasons Why You Need a Budget
If you do anything for your budget, make sure it’s the 5 tips above. It can be very tempting to overspend when you can’t afford to, but keep the big picture in mind. You are living life on the tight side because you want to live the life of your dreams in the future. If you need help setting a budget, I’m your girl! Schedule a free consultation with me, or provide your income/expense information in the Start Your Budget Form, and I can create a realistic plan for your situation.
What helps you stay on budget? Do you have any tips for others who are looking to follow their spending plan? Share what works for you (and what doesn’t) by posting a comment below! Also, feel free to ask me any questions in the comments section.
The CGS Team