Whether you’re a New Year’s resolution kind of person or not, it’s the perfect time to make a change, especially when it comes to your finances. Think of it as a fresh start, especially if you’re living paycheck to paycheck, are feeling overwhelmed with debt after holiday spending, don’t know where your money is going, just can’t seem to pay your bills on time, or all of the above.
Many of us think of budgeting as hard, takes too much time, and cuts out everything fun, but it doesn’t have to be with the right strategy. If resolutions are your thing or you’re just tired of worrying about finances and you’re ready to start, here are Tips from Ramsey Solutions to build your own budget and take control of your hard-earned money so it works for you:
Create a Zero-Based Budget before the Month Begins: Before the month even starts, take what you earn each month and assign every single dollar to a category, like rent, utilities, food, insurance, eating out, and miscellaneous (AKA the fun stuff), etc., so that you have zero dollars left. This ensures none of your money gets spent on unnecessary things and lets you see where your money goes in each bucket.
Prioritize the Essentials: Focus on core needs that keep your life running, the “Four Walls,” food, utilities, shelter, and transportation. This ensures you’re covering your needs first versus your wants. Once those are covered, you can budget for the fun stuff.
Overestimate Your Expenses: We tend to think we’re spending less than we are, especially when just starting to budget, so give yourself some breathing room and pad your numbers in areas like groceries, gas, or eating out. You can adjust the numbers as time goes on so they’re more accurate.
Adjust Your Budget for Every Month: Look ahead and add in seasonal expenses, like the holidays, vacations, home or car maintenance to each month’s budget. This helps you avoid last-minute stress by being prepared for them.
Prioritize Paying Off Debt: Debt keeps you stuck and steals your income! Knock it out with the “debt snowball method.” Focus on paying off your smallest debt first while paying the minimum on the rest. Once that debt is gone, roll that payment into the next smallest. This lets your payments grow so you can be debt-free faster and stay motivated.
Cut Unnecessary Expenses: Give yourself more breathing room and look for things to cut, like streaming services, eating out less, or shopping at less expensive stores until you feel like your finances are on track.
Automate Your Bill Payments: Save time, avoid late fees, and stay more organized by setting up autodrafts for things like your rent, mortgage, utilities, or insurance. Make sure your bill payment dates don’t wipe out your bank account by matching them to your paydays and spreading them out through the month.
Stop Relying on Credit Cards: Credit makes it hard to track where your money is going, can lead to overspending, and add interest charges.
Use Cash for Problem Areas: If you notice you’re overspending in one of your budgeting buckets, try using the “cash envelope system.” Take out the exact amount you’ve budgeted for in that area, put it in an envelope, and use only the cash you have. When it’s gone, you’re done spending.
Go Easy on Yourself: It usually takes three to four months to establish the habit of budgeting and see where you might need to make adjustments. When it starts to feel uncomfortable, remember your “why,” your financial goals, and keep going! This doesn’t have to be forever, and you’re in charge. So make changes to it as you go so you can make the habit stick.
As always, budgeting is our specialty at Ironworkers USA Credit Union. We’re only a phone call away and can walk you through the process, be your accountability partner, or offer more help to make it easier.
