Secrets to creating a budget
Budgets play a pivotal role in helping consumers pay off debt, increase their nest eggs and make the most of their money. Despite their best intentions, many American lack the skills necessary to effectively manage their money.
Here are several ways that you can create a successful budget.
1. First things first, you need to know where your money is going. Track your expenses for at least a month to get a good idea of where your hard-earned cash is going. Use a checkbook ledger or a sticky note inside your wallet to track every purchase you make, no matter how small.
2. A good rule of thumb is to put at least 10 percent of your earnings toward savings. Using direct deposit can help keep your hands off of that money you don’t need to be spending.
3. Define your spending and priorities for the remainder of your money. Things like housing and utilities come first, followed by savings for a new car or your child’s education, and then entertainment, food and clothing purchases.
4. In an effort to curtail your impulse buys, use only cash for purchases groceries, clothing and other nonessentials. Also try using the ATM only once at the beginning of the month, and limit yourself to that amount of cash you withdrew.
5. Strategically pay down expensive debt. Whether you choose to pay off your biggest debt first or start with your smaller debts is up to you, but it is key that you chip away at the debt that is keeping you from getting ahead.
6. Everyone should have an emergency fund that holds at least six months’ worth of living expenses. No matter what your debt situation, you will need money if you ever come into a hard situation such as a job loss, an illness, or large unexpected bill in the mail.
7. Stop trying to keep up with the Joneses, and live within your means. For most consumers, this means learning to cut back, and there are simple and easy ways to reduce your spending.
