Overspending happens easily. We’ve all had that moment where we’ve looked at our most recent purchases and been a bit surprised by our overzealous credit card swiping. That’s why it’s important to create a budget to maximize saving and to take control of your finances.
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Assess Your Current Spending
After the initial shock and buyer’s remorse of overspending, take time to look at credit card bills, bank statements, and old receipts to evaluate the breakdown of where your money is going. In doing so, you can find areas in which to cut back.
The first step of determining how to live on a budget is to break your income into categories of savings, needs and wants, and allocate a certain amount of your paycheck toward each. First, start with saving because it’s important to put some cash away in case of emergencies and for retirement. Needs include necessities for living like groceries, rent or mortgage payments and insurance. After all of these essentials, you can use your discretionary income to pay for everything else — like dining out or buying concert tickets — which constitutes the want category. Use a spreadsheet to help keep track of your purchases; however, don’t nickel and dime yourself as this might drive you crazy.
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Try This One Week
If you usually use credit cards, challenge yourself to only use cash. We have an emotional tie to cash because we can see the actual amount leaving our wallets, which may cause us to think twice about whether our purchase is a need or a want.
Buying Your Necessities
Unfortunately, there are some expenses we can’t avoid like groceries and transportation. Luckily there are plenty of ways to cut costs on these necessary evils.
- Use coupons at the grocery store. There are plenty of websites that do the nitty-gritty work of finding the perfect coupons so all you have to do is click print.
- If you don’t have public transportation, sign up for a grocery store rewards card that is partnered with a gas station.
Do it Yourself
Time is money, so spend your time rather than your money. In a world where everyone is constantly on the go, we cut corners to save an extra five minutes here and there. It’s amazing how much money those five minutes can save you:
- Take five minutes the night before work to pack your lunch. A homemade lunch is generally healthier and can save you up to $10 a day.
- Skip the coffee shop. If your morning latte costs around $4, you can save over $100 a month by making your coffee at home or the office.
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Become a Bargain Hunter
Living on a budget doesn’t mean you can’t have fun, it just means you need to exercise more self-control. For example, do you really need to eat out when you have food in the fridge? Don’t waste money on frivolous purchases. When you do decide to splurge, be frugal and search for deals like the following:
- Use websites like Hukkster to alert you about sales before buying clothes, home goods, or electronics.
- Set up an email account solely to receive companies’ promotional news about sales. Always search online for promo codes before you buy.
- Use Groupon, TravelZoo and Gilt City to find deals for local restaurants and activities.
A budget will teach you fiscal responsibility and train you to live within your means. Learning financial discipline and the importance of saving now will pay off later because it will allow you the freedom to occasionally splurge on things like a dream vacation or a new car. Budgeting gives you financial freedom and the ability to take control. To paraphrase businessman and entrepreneur Roger Babson: Don’t ask where your money went, tell it where to go.
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