Some people roll their eyes when they hear the word “budgeting” but what they may not realize is it’s a powerful tool that can help you get what you want. In fact, budgeting isn’t meant to just cover those things you have to pay, like rent and insurance, it’s also a plan to make sure you have room for the things you want, like entertainment or a special vacation. If you’ve tried to budget in the past, but had trouble getting started or sticking to it, here are some ideas to help you reap the rewards of good money management.
Why Budgets Work
Put simply, a budget is basically a spending and saving plan, based on your expenses and what you earn. As you work through it, you’ll begin to see patterns in how you spend, and that can help you see areas where you can cut in favor of other things. In other words, it can help you prioritize what’s available for saving, paying off debt and spending. By following your budget, you’re more likely to reach the financial goals you’ve set.
Overcoming Budget Challenges
- Making it too complicated to follow. Lots of people love to create spreadsheets and try different approaches, but many others need something simpler, like the four walls budget. It’s based on the idea that your budget should cover what it takes to live and keep a job, with a little more for saving. Not sure where to begin? We have a simple monthly worksheet that can get you started. Basically, you’ll add household, transportation and personal expenses and subtract that amount from your monthly income. What’s left is yours to spend or save.
- Going too far with budget cuts. If you’re going to be able to stick to a budget, then you need to be realistic about what to reduce or cut out altogether. Just like picking an overly strict diet makes it more difficult to lose weight, creating a budget that leaves no room for flexibility or fun may be harder to follow. If there’s not much money left after paying bills, start with small ways to cut back and work toward making larger changes later. Think of it as starting with a chisel, not an axe. For example, are you paying for a streaming service you don’t use? If you eat a lot of fast food or stop for coffee, could you cut back on how often and put aside what you’ve saved for that dream vacation? What about services like cable? Instead of canceling it completely, maybe a lower plan would work. Keep in mind that over time, even small steps can give you big payoffs.
- Finding it hard to resist impulse spending. Some people find it helpful to picture how they’ll feel when they achieve their goals, like paying off a bill for good or buying a car. That can be a powerful incentive to avoid impulse buying and a fun way to work toward your goal. Many of our members like to remove the temptation to spend by starting with a small automatic deposit to a savings account.
- Thinking of it as a chore instead of a plan. Changing how you think about a budget can also affect your success. Find ways to make it fun.
- Name it after your goal. If you name your budget after your goal, it keeps your eyes on the prize. Don’t you feel more motivated by the “Goodbye Minivan Plan” or the “Hawaii Heaven Plan”?
- Make it a game. Do you love to win? Beat the budget by finding ways to have extra money at the end of the month. Enjoy some healthy competition? Challenge a friend to a savings goal to see who can reach it first.
- Reward yourself. All of us enjoy rewards. And, if you set yourself up for a reward in the near future, it'll help you keep up your interest. For instance, if a long-term savings goal is a new fishing boat, you could reward yourself with a new tackle box for sticking to your budget for a month.
- Don’t forget to budget for entertainment. All work and no play can make anyone bored and frustrated. So, include budget money for the activities and things that make you happy. If you can find ways to be happy for less money—that’s great!
If you’re interested in improving finances, buying a car or house, understanding credit or getting out of debt, visit Navy Federal Credit Union’s MakingCents Knowledge Center for more helpful ideas on managing your money.