Budgeting is crucial to financial success. It can help you stay out of debt, pay your bills and save for big financial goals like retirement or buying a house. And most Americans agree: more than nine in 10 say that everyone should budget. Yet, only 67% of Americans actually did so in 2019. Maintaining a budget is often easier said than done.
Here’s a look at some tips and strategies to overcome budgeting challenges and to stay on track.
Set a schedule
Scheduling expenses can alleviate some of the stress associated with tracking your monthly spending. Set up auto-drafts for bills so they’re always paid on time. Establish routines around your spending. For example, meal planning once a week can help you determine exactly how much you’ll spend at the grocery store for that week, cutting down on impulse buys and unnecessary purchases.
Plan for irregular expenses
Remember to account for expenses that only occur once in a while. For example, you may spend a lot on holiday gifts in December, or on back-to-school supplies in August. Avoid letting these costs sneak up on you. At the very least factor them into your upcoming month’s budget. Or make the cost more manageable by spreading it out over multiple months. For example, if you know you’ll need to spend $750 to attend a wedding, you may want to break up that cost into $250 in the three months leading up to the event. The smaller line item may help you keep your budget on track without having to trim too much spending in other categories in any given month.
Create a buffer
While you can’t predict unexpected costs, you can prepare for them so you’re not blindsided if you encounter them. First, if you haven’t done so already, start building an emergency fund with three to six months’ worth of savings to cover big emergencies like losing a job or large medical bills. An emergency fund can help cover those surprise expenses without falling into debt.
Build a buffer or a rainy day fund into your monthly budget to absorb smaller financial shocks, such as minor car repairs or a bigger than normal vet bill. Look at an average of what you’ve spent on miscellaneous costs over the past year to help you determine how much of a buffer to build in. If you don’t use that money by the end of the month, roll it over into the next month to continue giving yourself extra wiggle room.
Stash banking offers a cash management tool called partitions. It can help you create different categories within your Stash account that allows you to put money toward any financial goal you choose.
Prioritize your goals
When developing your budget, first designate funds for necessary expenses, such as rent, utilities and food. Then you can start to prioritize how you’ll spend your discretionary income, which is money left over for things you want rather than need. If your primary goal is to save for retirement or to get out of debt, meet those goals first. Consider automating this process so it becomes a habit and you don’t even have to think about.
Also, if investing regularly is one of your goals, make that part of your budget. Stash offers a tool called Auto-Stash that can help you invest money automatically.
Use cash to control spending
How you pay for something can have a psychological impact on how you spend. Research shows it can be easier to overspend when using debit or credit cards, and that people are likely to spend less if they use cash. Consider keeping your expenses under control by withdrawing a set amount of cash at the beginning of the month to cover discretionary spending like entertainment, clothing or food. You can even use actual envelopes to categorize the money into different expenses. Using cash allows you to physically see what you’ve spent and how much you have left. Just remember once the cash is gone, you’re done spending in these categories for the month.
Stash’s Partitions1 feature allows you to put money towards any financial goal you choose, from paying down your educational debt to money for groceries.
Celebrate your progress
Keeping up with a budget is hard work. But all that effort can really pay off when you reach your financial goals. Keep your morale high by celebrating your budgeting milestones, such as paying off half your debt or saving your first $10,000 toward a down payment on a home. Budgeting doesn’t have to be all about restriction. In fact, allowing yourself to splurge carefully every now and then can actually help you stick to your budget in the long term. Your budget is a financial tool to manage your money and reach your goals. And the best one is the one you’ll stick to. Set yourself up for financial success by creating a budget—and using the strategies—that work best for you.