Dear Budget-Seeker,
Steve works as a computer programmer. While doing this , he makes approximately $80,000 a year.
Every couple of months, Steve looks at his bank account and bills online and is concerned that his minimum payments due on his credit cards are getting larger. Also, he has noticed that the amount that he owes grows even when he has not used his credit cards. Another thing that he has noticed is that his savings don’t seem to be growing very much. He keeps track of his bills on a spreadsheet. However, he has not spent time learning about the specifics of budgeting.
There are many ways to budget. But, as I always say about budgeting, the best budgeting method for you is the budget that you actually use and that actually works for you.
Are you budgeting yet? Have you decided which budgeting method is best for you?
Whatever budgeting method that you use, there are things that you should remember.
Top Thirteen Things To Remember About Budgeting
1. Always start with a budget.
Remember a budget is a road map for your money. If you don’t have a roadmap for your money, it will not know where to go. If it doesn’t know where to go, it cannot get to where you want it to go (nor do the things that will benefit you the most.)
2. When budgeting, Always pay yourself first.
This means always make deposits into your savings and investments (including retirement funds) before paying bills. How else can you get money growing without having something invested?
3. Read to continually grow your knowledge about money, budgeting, and investing.
Keep Reading. It’s a habit shared by many wealthy people, both before and after they get wealth.
4. Don’t spend money that you don’t already have. Instead, only spend money once you have it.
To do this, it is best to use cash. By only spending the money that you have, you will limit your purchases to things that you can afford. You will need to save to buy more expensive items. Remembering to do this, will help prevent you from going into debt (or going further into debt.)
5. Remember that the first thing to do with money that you earn is to buy assets that earn you more money.
Then you can take money made by those assets to then buy your wants. It might take you a while to get to the point where your assets can buy you something big. But, don’t stop buying assets. At first your assets may get to the point where they could buy you an occasional Starbucks coffee treat. But if you keep putting more money into assets, your assets will be able to buy you more. If you put the money that you earn from your assets back into assets, your assets (and therefore the money earned from your assets) will grow even faster.
6. Spend less than you earn.
If you are using credit to purchase things, you are likely spending more than you earn, and you are in debt. If you make a lot of money and you are spending what you earn, you may not be in debt. But you are living paycheck to paycheck. That’s not good either. You have to spend less than you earn in order to have money left over for saving and investing.
7. Automate and strategize your debt repayment.
By automating your debt repayment, you will be sure to not miss a payment. Also, having a strategy for how to speed up your debt repayment is something that you should do. Did you find yourself with an extra $20 at the end of the month? Consider putting it toward paying off a bill faster. Don’t wait, send that extra money in now.
8. Always have an emergency fund.
This will allow you to be able to handle emergencies while at the same time not breaking your budget, or even worse, causing you to cash out and spend your investments.
9. If you make any money in dividends or interest in a non-tax-favored account, remember that you will need to pay taxes on that income.
So, set aside one-third of that income to cover taxes. It would be wise to set that money for taxes aside in a separate savings account. Otherwise, you may accidentally spend it.
10. Don’t forget about compound interest.
Compound interest is the addition of interest on the combination of the principal amount of money loaned and the previous interest charged. Compound interest can work for you or against you. For instance, money in your bank account will earn interest, and if you leave all of that money there, the money that you deposit, plus the previous interest earned will earn interest. On the other hand, If you owe money on a credit card, and don’t pay it off in full, you will owe more money, because compound interest will be added to what is still owed.
11. Consider making a vision board of what you want in the future, a year or more out.
Then, looking at it daily may help you to stay focused on and avoid sabotaging your long-range goals.
12. Part of budgeting, means check ing your budget every month (at a minimum).
Know how much you have coming in each month, and how much you have going out each month. Know your fixed expenses and your variable expenses.
13. Become aware of all of your employee benefits.
Some benefits that various companies offer include: retirement savings plans (like a 401K or 403B), insurance (health, dental, vision, life), and he, and more. You need to make sure that you know what your benefits are so that you can make better financial decisions. Do you need to buy more life insurance? Do I have health insurance? Does my health insurance include vision or dental? DO I have a retirement plan? If yes, does my company offer matching contributions? If yes, am I taingin full advantage of it, by contributing up to the highest amount that the company will match? (Or, am I missing out on free retirement money?)
I hope this helps. If you read through the entire list of suggestions, write “Budgeting Rules!” in the comments.
Wanna learn more about building spending less, saving, budgeting, or building wealth?
Check out these post:
Uh-Oh! Did You Forget Everything You Learned in Your Financial Literacy Class?
5 Suggestions on How To Live Below Your Means
Keep Budgeting and Encourage Those That You Care About To Budget,
Rich Mom
Tea loving Mom
P.S. Have you started budgeting yet? Do you have any things that you think everyone should remember when budgeting? Let me know in the comments.
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I am not an investment advisor. The information that I share is not to be investing advice. It is meant to inspire. Always do your own due diligence and research before investing. Check with your own investment advisor.
Also remember that past performance is not a guarantee of future performance.
Thank You!