Most people think of budgeting like dieting. Usually, they hate to do it. However, budgeting doesn’t have to be an awful thing. There are steps you can take so that you know how to budget for your biggest expenses. This starts with your budget and ends with shaving the extras off your daily spending habits until your budget can accommodate your expenses. Here are four tips to try to make that happen.
1. Give Your Money a Job
Before you do anything else, you need to tell your money where to go. According to financial advisor Dave Ramsey, you should have your money earmarked (budgeted) for something at the outset of each month.
The goal is to budget yourself down to zero, meaning that there isn’t a dollar of your income that doesn’t have an assigned place. You always know where your dollars are going.
2. Use Cash
If you constantly ask yourself, “Where did all my money go,” you may be a good candidate for using a cash system. According to financial expert, Ramit Sethi, he shaved 18% off his spending just by using cash only. When you pay with cash, you become acutely aware of how much you spend (and how hard you worked for it.)
Pull cash out of the bank each month to spend on items like groceries, gas, and other daily incidentals. Don’t go over this amount. Use the extra cash that you save to pay for your bigger expenses or for savings.
3. Car Savings
Ideally, you’ll have enough money in savings to pay for a car outright. However, this isn’t always an option for people. It is then in your best interest to shop around for a car and compare prices on different models. It also may be in your best financial interest to lease a car instead of buying one.
For example, a comparison of lease versus buy options on the Bay Ridge Nissan website shows that it costs $130.00 a month to lease a 2017 Nissan Altima. To finance the same car would be $252.00 a month. If you’re most interested in saving money every month, you should consider leasing. The leasing option saves you over $120.00 a month, money you could use elsewhere.
4. Give Up the Small Things
You love your morning coffee. No doubt about it. No one says you have to give it up altogether if you’re trying to save money. However, you may want to give up that daily trip to your favorite coffee place. A cup of gourmet coffee a day costs between $4.00 and $5.00 a cup. That adds up. It can total anywhere from $120.00 to $130.00 a month.
Why not buy an insulated mug and even treat yourself to a cappuccino maker? One bag of gourmet coffee will run you about $5.00 and last a week to a week and a half. You’ll save a bundle over time and you’ll have enough money to take care of big expenses like car and house payments.
There’s no real magic trick in saving money. It comes down to planning and knowing where your money goes each month. Once you have your budget in place for the month, stick to it. Know how much you spend on each item on your monthly budget from car payments to your daily coffee habit. Once you know what these numbers are, you are in a position to shave off the extras until your budget falls into place.