7 Tricks to Budget Like a Pro
Life in the 21st century is pretty amazing. We have access to nearly limitless options - where to live and work, which degree to earn, what to eat for dinner, which show to stream, where to go on vacation, and so on. It’s great, but it also presents a problem: we are finite. We have finite time and energy. We aren’t able to do all of the great things that we may want to do within our given time on Earth.
The same tension exists with our finances. Our budgets are pulled in a million different directions. We have kids to care for, loans to pay, and money to spend or save. Learning how to effectively develop a budget can help ease the stress of having limited money but unlimited ways to spend it. Here are a few suggestions.
1) Establish an emergency fund. You will hear this time and time again from financial planners throughout your lifetime. It’s probably the single most important action to work toward today to take the stress off your future self. Save three to six months’ worth of your normal expenses in case of a large unforeseen expense or job loss. Build it back up whenever you dip into it.
2) Figure out what you value and prioritize accordingly. If you aren’t sure what you value, you’re going to have trouble assessing if you’re spending your money in the best way possible. Talk with your family about what is most important to each of you and begin to spend accordingly. Involve everyone in your family, if possible.
3) List your goals and set ways to reach them. If you want to buy a car, price out the car and set aside a portion of your paycheck every month for the purchase of the car. If you never set the goal, you may never have the funds available to meet the goal. This is particularly true when it comes to retirement planning.
4) Review your spending. For most people, the best way to track the effectiveness of their budgeting is to review their expenses for the last six months. What were the highest expenses? What were the lowest? Do these line up with your values? These are great questions that we should be asking ourselves at least every six months.
5) Seek good advice. We often keep personal finances close to our vests and don’t like to ask for help, even though there are many people who could help guide us! Family, friends, and financial advisors may all listen to your ideas and give you their insights. Professional advisors are the most likely to give you an unbiased opinion.
6) Invest your money. It is also vitally important to invest for longer term goals, such as college and retirement savings. Perhaps more critical than an emergency fund or saving for a specific goal, investing helps our savings grow in value over time, rather than being eaten away by inflation.
7) Give yourself grace. There is no one right way to do your finances. There will be things to regret over the years and many things to celebrate. In the end, if you do your best to spend your time and money in ways that reflect your family’s values, the rest will take care of itself.
If you have any questions concerning your budget, investing, or other financial advice, we would love to help. Please contact us to set up a meeting.