Stop Waiting for Payday: Plan Your Budget Ahead

Many people are caught in the perennial cycle of living between paychecks. At the beginning of the cycle, they will spend heavily; but at the end of the cycle, they are forced to be more cautious. Despite that this is a common behavior, I think there is a better way forward.

Choose Three Budget Categories

Interestingly, most people do not overspend in every category. For example, most people do not overspend on gasoline or paying their debtors. They will overspend on food (dining out), clothing, books, or entertainment. If the prospect of tracking every time that you spend seems daunting, then identify three of your problem areas and track those.

Mindful Spending

Most people do not even think about it when they waste money. They just see a restaurant that they want to try and will spend $15 on lunch without even thinking about it. A good approach is to internalize your spending habits. Look at your receipts after dining out and say, “Interesting.” That does not mean that you have to beat yourself up. Just acknowledge it.

Cash Vs Card

Budgeting experts seem a little conflicted about whether cash or credit cards are ideal. Some think that cash might be better because people might be more conscience of the fact that they are spending their money. On the other hand, using a card will make it easier to track everything that you spend. Both approaches seem to have a few benefits.

Give Yourself Another Bill

Another bill might seem counterintuitive. But I do not literally mean that you should find another expense. Open a savings account and start a regular payment plan, treating it like a bill. Since most people spend heavily in the beginning of the pay period, ensure that the deposit comes early in the cycle. Save early and spend later.

Elizabeth Warren’s 50/20/30

Many people can actually live on significantly less than their income. Elizabeth Warren suggests that you designate 50% of your income for your bills and necessities. 20% should be designated for your savings account, and 30% should be designated for your entertainment, clothing, home decor, and anything else that you want (this is the fun money).

Allot Time for Budgeting

It actually is not that time consuming once you establish a pattern and a formula. If you divide your budget into categories and subcategories, you will have a simple way of tracking what you spend and what you can afford.

Use Budgeting Resources

You do not actually have to exercise all of the intellectual muscle. There are plenty of tools online that you can link with your bank accounts. They will depict how much money you are spending on a regular basis. Some will even divide your budget into categories for you. The only potential fudge factor would be cash purchases. But if you limit the cash that you spend, you should be able to track that effectively as well. Also, cash withdrawn from an ATM will still show up on your budgeting report.

Household Investments

Many consumers are becoming increasingly concerned with the environment and wasting the earth’s limited resources. But by using green appliances, you can play a role in conserving energy. This project will also reduce your monthly expenses. They may initially be more expensive, but they come with a return on investment (savings).

Turn Everything Off

You might not think that it is a big deal to leave the light on when you leave your house, but it can actually cost more money than you would expect. Some think an illuminated light bulb costs 75 cents for an hour of use. Similarly, leaving the television on and letting the water run while you are doing the dishes or brushing your teeth can all contribute to a higher energy bill.

A New Mattress

If you are somebody who suffers from back pains throughout the day, the culprit might be your mattress. This could result in high medical bills and payments to your health insurer. While purchasing a new mattress might create an initial expense, it could potentially save money in the future. It is another purchase that comes with a return on investment.

Spend Extra Money Wisely

If a deceased relative left you an inheritance or you received a financial aid refund, there might be a temptation to use that money to have a good time. But it will not last forever, and you will learn that quickly if you spend recklessly. Use any extra money that you get to pay your overdue bills. Pay off your mortgage for the next few months and designate what would usually go to mortgage for your savings account.

Budgeting can be a challenge. But with a little bit of self-control, wisdom and management, you can reach your financial goals.

Author bio:Brice Matheson is a Financial Advisor, constantly informed about credit opportunities and new business and banking software on the market. He is also a Contributing Editor for Money Plate, which is a place he and the rest of the team can lend a hand on teaching young people more about how they should handle their personal finance.

Photo: Tax Credits

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