With everything that's happening right now and as you find yourself spending more time at home, it may be the perfect time to create a budget. Budgeting is key to understanding your finances and answering the question 'where does all my money go?'.
Budgeting doesn't have to be complex. Essentially a plan for how you spend and save, budgeting puts you in control of your finances. To help you get started, we've put together some budgeting tips that make creating a budget easier so you'll be more likely to stick to it and save a little extra along the way.
1. Start an emergency fund.
It's never too late to start an emergency fund. Prioritize savings and begin setting funds aside in case of an emergency. Automating savings is an easy way to get started. Consider setting up an automatic draft or transfer so that your money goes directly into your savings account. This way your money is 'out of sight and out of mind' - removing the temptation to spend it elsewhere.
2. Establish needs vs wants.
When managing your budget, it's important to understand the difference between needs and wants so you're able to make better spending decisions. In times of job loss or a major reduction to your income, things like gym memberships and subscriptions may fall in the 'want' category. Needs should be categorized as crucial or necessary for your daily life such as food, rent, or your mortgage. These should take priority in your monthly budget. If it is not a need, it falls into the 'want' category—sorry Starbucks. Wants are those things you can live without such as entertainment, travel, and eating out with friends. Categorizing your spending may help you make better decisions.
3. Track your spending.
Multiple small purchases quickly add up by the end of the month. While spending a dollar here or there might not seem like much, it can take a toll on your budget over time. The best way to overcome this is to keep track of your spending. If you track all of your expenses (no matter how small) you might be surprised to see how much you really spend each month. You can use Online and Mobile Banking to keep up with your spending and account balances. Check out our Financial Resources for helpful worksheets to get you started.
4. Cut your expenses.
Once you've categorized your spending (needs vs. wants), it's time to evaluate your expenses and cut back on those non-essentials. The more you cut back on your spending, the more you'll have available for emergencies and it could help add to your savings. A few ways you could cut back are by buying generic brand items or doing tasks yourself such as mowing the lawn. Each person is different and each budget is different - the key to cutting back is that it allows for you to 'pay yourself first' and build up an emergency fund.
5. Earn extra cash.
Do you have a hobby or skill you're good at such as writing or photography? What better way to boost your budget and make extra money than doing something you enjoy? Don't have a hobby? No worries. There are many opportunities available to increase your income such as food delivery, petsitting, driving for Uber, freelance work, or selling unwanted items such as books, clothes, and electronics. Finding ways to earn extra cash will provide your budget with an extra cushion that you'll be grateful you have the next time an emergency comes up.
6. Check in on your budget regularly.
The hardest part of a budget can be sticking to it. It's important to do regular check-ins to help stay on track and keep spending under control. You might also find that some expenses vary from month-to-month, and some pop up annually. Or you might have income that fluctuates from month-to-month. You may make more from your freelance gig one month, giving you some extra cash. By checking in regularly, you can stay on top of your budget and prevent over spending.
While you may not necessarily love the idea of creating (or sticking to) a budget, setting aside some time to make and maintain your budget is well worth it. Your wallet (and your savings account) will thank you. Plus, if you stick with it long enough you may even reach a financial goal or two and find that you have the resources available to handle an emergency expense.