Smart Spending: Budgeting Tips to Set You Up for Success
Mayra Kavan,
The holidays have come and gone, and so has the money in your bank account
The holiday season is a magical time of year, watching family and friends joyfully open gifts, generously giving to others, and awaiting the dawn of a new year. But nothing tells you the holiday season is over faster than looking at your bank account in January.
Money may be tight this time of year after getting the perfect gifts for everyone (and maybe a few for yourself). Luckily, a new year is here! This is the perfect time to wipe the slate clean and start fresh with your finances for 2020.
Let’s explore some budgeting and spending best practices for the new year, so you can set yourself up for success. Your future self will thank you!
Key takeaways:
- How to set budgeting goals
- How to track your progress
- How to pay off debt quickly
- How to hold yourself accountable and think about frivolous purchases before they happen
- How 1THRIVE can help
Figure out where you are and where you want to go
The only way to know if your finances are improving is if you know your starting point. If you’re like most people, you don’t monitor your income and bank accounts regularly, or at least, not as often as you should.
Start by looking at your paycheck. Familiarize yourself with the deductions (tax, Social Security, retirement) and how much you’re actually taking home at the end of the day. Next, calculate your monthly expenses. These are mandatory costs that you need to live; rent/mortgage, utilities, cellphone bill, gas, groceries, etc.
The next category is often the hardest pill to swallow: discretionary spending. This is the money you spend on things like eating out, entertainment, gadgets, clothing, etc. – things you want but don’t really need.
It’s up to you how you spend the rest. Dedicating a portion of your income to savings or investments regularly is a good idea if there are no other immediate needs on the horizon.
Evaluating your financial status is the hardest part because it means facing the reality of what may be a painful situation. But once you get a grasp on where you stand, you can determine where you want to be.
The next step is to establish goals to get you where you want to be. This will vary from person to person. It may be a short-term goal like buying a house or a long-term goal like retiring at 60 years old. Knowing where you want to go will tell you how much you need to reduce expenses and how much of your income you need to save to get there.
Whatever your goal is, write it down. Writing things down can help make them more realistic and help hold you accountable.
Budget and track
Speaking of accountability, building a budget will help you stay on track throughout the year. Use our free budget and bill tracker printable.
It’s easy to track expenses like bills and gas that stay relatively the same month to month. A budget really comes in handy with tracking more fluid discretionary expenses. Keeping a log of these will bring you face to face with your spending habits and make it obvious where you are overspending. If your Starbucks bill makes your eyes bulge out of your head, you might want to scale back on the caramel macchiatos.
Automate
If you’re nervous about holding yourself accountable, set up automatic transfers to make saving money less stressful. Depending on your goal, set a specific amount to go from checking to savings every month. Whether it’s $10 or $1,000, putting your savings on autopilot will give you peace of mind.
You can do the same with retirement savings. If your employer offers a 401(k) plan, you can allocate a certain percentage of your paycheck to go toward that account before you ever see it or know it’s gone.
Save any extra money along the way
It may be painful at first, but budgeting and saving feel good. It’s empowering to know that you’re actively taking steps to secure your future, and even more reassuring to know that you’re not scraping by paycheck to paycheck.
Once you get into the habit, it will be easier to maintain. So when you come into extra money, maybe it’s a raise at work or just $100 from grandma on your birthday, put it into savings. If you are happy with your lifestyle and don’t want to make any major adjustments, put this money away as soon as possible. You won’t miss it if you never see it.
Pay off debt
If you have debt, one of your focuses for 2020 should be on paying it off or at least decreasing it. Whether it’s credit card debt or student loans, the cost will only increase the longer they’re left open.
One strategy is called the snowball method. This method addresses the smallest debts first, disregarding the interest rates. Once you pay those off, you allocate that same money to the next biggest debt. You keep doing that until you work your way through them all, rolling the snowball down the hill. The hope is that paying off smaller debts will give you a sense of accomplishment and motivation to keep going.
In contrast, the avalanche method tackles the debts with the largest interest rates first. These debts grow faster and can cause more damage if left unattended. If you need more motivation to address your debt, you’re a snowball person. If you can easily hold yourself accountable for the long haul, you’re an avalanche person.
It helps to lay out all your debts at once and do the math. Figure out the interest rates and minimum payments first. If you can dedicate more than the minimum every month, that is ideal. Then calculate how long it will take you to pay off the debt at that rate. Decide on a strategy that is realistic for your budget.
Use the 24-hour rule
If you have some trouble with impulse control, try using the 24-hour rule. If you’re out shopping and see something you really want, leave the store and give yourself 24 hours to think about it.
If you decide you still want the item, go back and buy it. Often, you will forget about it completely or decide you really don’t need it after all. This is a handy way to save yourself from splurging costs that can really eat into your budget.
A 1THRIVE Center can keep you on track
Staying focused on your financial goals requires the right organizational tools. A 1THRIVE Center is a simple and beautiful way to hold yourself accountable.
1THRIVE Centers come in seven different configurations so you can choose the layout that works for you. Jot down reminders or key benchmarks on the chalkboard. Maintain a savings calendar on the whiteboard. Save receipts and bills and in the file storage area. Throw every $5 bill you find into the detachable bucket, and watch how quickly you can save.
1THRIVE Centers offer flexible spaces for you to tackle your financial goals head-on, keeping them front and center so you never lose focus. For additional guidance, check out our free printables to help you organize your financial journey. Start 2020 off on the right foot. Find your 1THRIVE Center today.
