Keeping a budget seems like such a basic, fundamental concept to finance. But the data suggests that, for most families, maintaining a budget isn’t so simple after all.
61% of adults admit to not having a budget, according to the National Foundation for Credit Counseling® (NFCC). That means over half of adults don’t know the details of what their money is up to every month.
Why? Budgets Help Improve Your Financial Situation
It’s difficult to stay out of debt, build up savings, and know what you need to do if you don’t know where you’re currently at with your money. That’s exactly why a budget makes a difference. With minimal effort, it helps you see at a glance what your financial picture looks like at any time throughout the month.
A budget is empowering, because you can then make immediate adjustments as needed to keep you or your family on the right financial track. If your spending is inching up in one area, you know you need to dial it back down — and if you’re building up a budget surplus and spending less, you can see exactly how much you have to help you reach your financial goals.
What? Simple Budget Guidelines
Okay, you get it: a budget is important to improving your financial health. And to be fair, maybe you have known that…and just didn’t know where to start when it came to making your own system for keeping up with your money from month to month.
Budgets shouldn’t be complicated once they’re up and running, but determining where your money should go can get confusing. Everyone’s budget probably looks a little different. That’s because we’re all working toward different financial goals.
Here are some general guidelines you can follow in order to stay on track. You can break down your budget and allocate percentages of your income to different categories like this:
Housing expenses: 25%
Fixed and flexible expenses (Bills-fixed expenses or expenses that can change/you have some control over, like groceries or how much gas you put in your car): 25%
Mid to Long-term savings and investments: 10%
Short-term savings (like your emergency fund): 10%
Debt repayment: 10%
Discretionary spending (like meals out and entertainment): 20%
Of course, these will change slightly depending on your financial situation.
The important thing to remember is that these are some guidelines to get you started — they’re not hard and fast rules set in stone. Once you discover what works best for you its important to stick to it and make sure you hit your goals. Don’t get distracted and spend above your set guidelines.
When? Tips for Maintaining Your Budget
Your work isn’t done as soon as your budget is established. It can’t maintain itself! Here are some tips on keeping up with your budget and sticking to it:
Be realistic. Don’t get too extreme with your budget; if you try and cut down almost all discretionary spending in an effort to save more, or to put more towards debt, you won’t have something you can sustain.
Straight Cash. Try using cash instead of your debit or credit card. Once your cash is gone, it’s gone!
Embrace technology. There are a number of apps out there that can help you track your spending and help you see where your money has been going.
Maintaining a budget is paramount to improving your finances. Once you’ve gotten into the habit of keeping your budget, schedule a time to regularly review it. This may be once a week, twice a month, or once a month. Think of it as a date night, but with your money. These money dates will help keep you on track as you make big progress towards your financial goals.
By Kali Hawlk, Staff Writer