For many people, the act of sitting down and establishing a realistic budget is much more intimidating than actually maintaining a budget. And while there may be plenty of questions along the way, here are a few things I tell people who are just getting started on their budgeting journey.
Define your goal. You want to start by accounting for everything in your life: income, family, and your long and short-term plans. From there, you can determine a goal to work toward. Maybe it’s paying off student loans, maybe it’s paying off a mortgage, or maybe it’s chipping away at credit card debt. It doesn’t so much matter what it is. The important thing is that you define a goal for your personal situation and stick to it. Because if you don’t have an objective you’re working toward, what are you really budgeting for?
Savings is key. Don’t only focus on spending and overlook savings when determining your budget. Savings is absolutely an important factor of budgeting and can be used in emergency situations or put toward other goals like buying a car or a house. However, you need to be realistic with your savings plan or it can have the potential to backfire.
When starting out, pick an amount of money you can commit to, even if it seems too low. Putting away money each month will actually feel doable when you don’t set your expectations too high. In turn, you’ll create the habit of saving, and once that habit is formed, saving will become second nature. Eventually you’ll be more likely to increase the amount you put away and, more importantly, stick with it.
Recognize needs versus wants. Once you have everything written out, go back in with a fine-toothed comb and be realistic about what’s actually a necessity and what you can do without. Many feel they’re unable to budget within their means but are surprised to find all the little ways they can be saving. Going to the movies, dining out, and buying a coffee every morning are all expenses that may seem small in the moment, but can really add up and put you over your spending for the month.
At the end of the day, know that every person’s budget is unique. Only you can truly determine what’s best for yourself and your family. Once you start comparing yourself to others, it’s easy to push yourself out of your comfort zone and even give up altogether. Remain consistent, make budgeting a habit, and reach out to a banker at Associated Bank if you have questions. By taking advantage of the resources available to you, you can be well on your way to reaching all the financial milestones you’ve set for yourself.