Spending less than you make sounds like a simple financial goal, but it can be a challenge for many families. Achieving this goal can allow you to stay out of debt, invest for retirement, and save money for emergencies. In essence, this can be a ticket to financial freedom.
A recent Federal Reserve Board study found that nearly half of respondents wouldn't be able to cover a hypothetical $400 emergency without borrowing money. Some aren't able to meet this goal due to a lack of income, but in many cases, the problem is overspending. When overspending is an issue, some simple budgeting tools can help you see where your money comes from and where it's going.
Here are just six budgeting tips to move you closer towards the goal of financial freedom.
1. Set Some Goals
The primary purpose is to spend less than you make, but it's important to set down both some short and long-term goals for your finances. If you'd like to be able to afford a modest vacation once a year, write that down. If paying off student loans within the next five or ten years sounds good, list this out. Don't forget other important things like college savings for children and retirement planning.
2. Track Your Income and Spending
If you don't know where you are right now, it's going to be difficult to create a budget. Income and expense tracking is a critical part of successful budgeting. Many online tools allow you to do this, so you should find one that best meets your needs. A few examples are YouNeedaBudget.com and Mint.com.
3. Find Some Accurate Budgeting Tools
Once you know where your money is going each month, you'll likely be able to see some areas that could use improvement quickly. If you're spending 20% of your income on restaurants and bars, this can be reigned in gradually over several months. You can use those same online tracking tools to create a realistic budget for your finances going forward. As you reduce some of these wasteful categories, you can start funneling those funds into things like a savings account, debt repayments, and a retirement fund.
4. Be Realistic
Budgeting isn't easy, and many compare it to dieting. If your goals are too lofty, you're more likely to stumble and just chuck the entire plan. Instead, take baby steps and gradually cut back on a few wasteful spending categories each month. Each small success will inspire you to move onto the next goal.
5. Line Up Support
Taking control of your finances is a big step and might be a difficult task to tackle on your own. Consider enlisting the help of your family or close friends as emotional support. Let them know what you are trying to accomplish, and they might be less likely to push you to overspend. It might also be a good idea to find some new friends who make wise money choices and don't focus solely on material possessions.
6. Make Adjustments as Needed
Budgets are meant to be fluid, so there is nothing wrong with making changes when they're justified. Incomes sometimes change as well. If your situation changes, or you forgot about some key expenses, make adjustments to your monthly budget to get you back on track.
Budgeting may not be fun, but the financial freedom that comes with budgeting success is a powerful reward. As you create your budget, consider making room for a life insurance policy to protect your family's financial future. Use our term life calculator to find out how one of these affordable policies can fit into your new budget.
Knowledge is power. The more you know, the easier it is to make an intelligent choice. Everyday life, as well as certain events and circumstances, require you to make choices. And peace of mind is gained when you feel good about the decisions you make.
When it comes to life insurance, IntelliQuote is there for you to make the intelligent, well-informed choice. From term life insurance to universal life insurance and final expense insurance, we make it easy for you to compare, shop and save. Get multiple quotes now and make the intelligent decision for Life.