Making a budget isn’t difficult; in fact, 80% of Americans say they have one. The problem comes when people try to stay on a budget. Approximately 80% of those who made a budget did not follow it, resulting in an average of $7,400 in overspending per year. So, how do people who need a budget stay on one? Here are a few tips from our experts on how to stick to a budget.
1. Use Zero-Based Budgeting
The concept behind zero-based budgeting is making sure every dollar has been allocated each month. For example, add up monthly expenses and subtract the total from your monthly income. Any remaining money should be placed in a savings or retirement account. Leaving money unallocated is a fast way to derail a budget.
2. Try Automatic Bill Pay
Some companies allow employees to pay big-ticket items such as mortgages from their paycheck. Taking advantage of auto-pay features means you don’t even see the money, so you can’t spend it. Whenever possible, set up recurring online payments. They work on the same principle. If bills are paid automatically, you aren’t tempted to divert money from a needed item to a wanted one.
3. Plan Meals
Planning meals can keep you on budget. When you know what’s for dinner, it’s easier to bypass fast-food chains or restaurants. Packing a lunch eliminates the less healthy and more costly business lunches. Take the time to plan three meals a day plus snacks; then, make a grocery list and stick to it when you head for the store. Limit the number of times you shop to avoid impulse purchases.
4. Organize Weekly
For some, breaking down budget items into weekly rather than monthly amounts can help stay on a budget. If groceries are set at $1,000 per month, breaking it down into weekly amounts of $250 can help focus your spending. If you’re not careful, you can spend your monthly budget for groceries in a few weeks, leaving you a little short at the end of the month.
5. Look at Monthly Calendars
As you prepare a monthly budget, look at your calendar. Birthdays, anniversaries, and weddings can derail a budget if not included in planning one. If you’re hosting a dinner party or a wine tasting, plan for the extra supplies and food you’ll need. The added costs for entertaining can contribute to that $7,400 of overspending.
6.Wait a Day
You need a budget to help separate needs from wants. Whether it’s a new coat or couch, wait 24 hours before purchasing. Not everything needs to be bought immediately. Waiting 24 hours gives you time to think through the purchase. If it’s not a need, put any extra money towards the purchase of the item. You can still purchase the item without blowing your budget.
7. Limit Credit Card
People can limit their use of credit cards in two ways.
- By limiting the available credit
- By limiting the number of cards.
Keeping available credit to a minimum is the best way to avoid overspending. If it isn’t there, you can spend it.
8. Buy Groceries Online
If you consistently overspend on groceries, try buying them online. About 20% of a household’s grocery expenses come from impulse buying. Stores create displays and design store layouts to encourage impulse buying. Approximately 40% of consumers spend more than they planned when shopping in person, while only 25% reported impulse buying online.
9. Be Accountable
Be accountable to someone. Maybe, you have a friend or partner that needs to work on budgeting, too. If you know a premier budgeter, ask if they’ll help. Meeting with others on a consistent basis helps keep you focused on financial goals. Whether it’s making sure you have set a monthly budget or talking about new goals, being accountable to someone is the best way to stay within a budget.
10. Try Envelopes
When the world used cash, advisors developed the envelope method. When budgeting, people identified those items that they would pay by cash, such as gas, fast-food or groceries. They would label each envelope with a different category. At the start of the month, they put the budget amount in the envelope. When the money was gone, people had to wait until the next month. No borrowing from a different envelope.
Today, the envelope method is harder to do since most people pay with a debit card. You can withdraw the monthly amount through an ATM and maintain the envelope approach. An alternative is to create a separate account and associated debit card for the “cash-based” payments. Transfer money to the account and use the debit card for purchases. You will need to track how the money was spent so you can stay within budget in each category.
11. Learn to Say No
Budgeting means learning to say no to that pair of shoes or another latte. It is also learning to say no to others. If your budget doesn’t allow for another night out, say no. There’s nothing wrong with making sound financial choices.
Learn more about MPCU’s online banking and money management tools, or contact us today.
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