While countless financial articles advise keeping a monthly budget, many people don’t find budgets to be an effective way of managing money. In fact, a survey from Gallop shows that only 1 out of 3 Americans have a structured budget. A budget is typically a very smart idea if you tend to overspend or are on a fixed income where every dollar counts. However, it may not be necessary for everyone. IF you don’t keep a budget, you may be asking, “what’s the best way to keep track of my finances?” Read these five tips to find out!
1. Focus on Saving Rather than Just Budgeting
It’s good to stick to a budget, but if you’re not looking at the bigger picture, you’ll forget to put your money towards meaningful goals. It’s important to focus on how much you want to save each month, and what you want to save for. You can put your money towards an IRA, a money market account, or a certificate to maximize your savings (all these options are offered at FFCCU if you need help setting something up). Regardless of where you save, don’t budget to budget. Instead, find a way to make your savings work for you!
2. Don’t Hyperfocus on Day-to-Day Expenses.
Sometimes, if you start tightening your belt too much, necessary expenses may give you unwarranted anxiety. Having some anxiety over large purchases is normal. Still, if you constantly worry about spending even small amounts, it might be time to examine your mental health and find more confidence in your ability to use money. Some psychologists suggest hypervigilance about money could signify that other components in your life feel out of control. Take some time to see if you’re struggling with money or doing fine but dealing with other emotional factors.
3. Use the Pay Yourself First Method
If you have an investor mentality, you might prefer to follow a method that aligns with your interest. This is where the “pay yourself first” method comes into play.
First, allocate a certain portion of your income each month towards investments and retirement funds to pay yourself first. Then, the money remaining after that is used for your monthly bills. If you have any spare cash, you can use it on your wants. However, assess your financial situation and see if this makes the most sense.
If you find this method works best for you, you don’t need to worry about budgeting because you already have a goal you’re working towards and have already divided your money into investments, needs, and wants.
4. Focus on Where You Can Cut Back
While budgeting is an excellent method to follow, it might not be practical for you. Instead, focus on where you could cut back month to month and put that money towards a goal. Are you trying to save money for an airline ticket? Maybe ditch a subscription you’re rarely using or cut back on eating out.
Rather than focusing strictly on your expenses each month, find a way to cut something out to stick to a savings goal. It might work best for you!
5. Focus on Spending Rather than Budgeting
While many people make a budgeting plan, not many focus on a spending plan. Periodically, look at how you spend your money and see if you need to cut back.
You can even divide your spending based on needs and wants. See if your wants are taking up too much of your income and try balancing it with your needs. Even if you could justify spending your money on a luxury car (after all you need a car), does it make sense to get something that expensive? Don’t spend more than you can afford just for the sake of it, and find a good balance between what you want and what you truly need.
This could work better than making a strict budget because if your spending is on track, you may not need to budget.
Budget… or Don’t!
While budgeting is a great way to get clear insight into your expenses, it’s not the end-all for financial responsibility. Remember that at FFCCU, we offer several ways to help you save that could work for you. The Dare2Compare challenge is where we sit down with you and see where we can save you money! It’s a great way to contemplate your finances. If you’re interested in long-term savings goals, look at our travel and holiday savings accounts. These accounts work for you by maximizing your savings towards holiday shopping or a future vacation! Don’t hesitate to reach out if you need help with your financial goals!