You need a strategy to save more, spend less, and avoid budgeting disasters. Take note of these five simple tips to use your money efficiently today.
1. Set up your budget.
The only way to use your money wisely is to have a system for spending it. This is your budget, or a monthly spending plan based on your income and expenses. With one in place, you can spend less than you earn, reach your financial goals faster, and understand where your money is going. It is not complicated at all – just account for all your income and expenses in a month.
2. Record everything.
Do you want your money to work for you? Start tracking where it goes. If you do not know where your money is going, it is difficult to stick to your budget or change problematic habits. Also, looking at your records will point you to areas that you can improve on. The more you optimize your budget, the bigger your chances of making larger savings.
3. Balance your checkbook.
No, it is not an outdated practice. In fact, balancing your checkbook will protect you from fraud or bank errors. Every day, update the balance in your checkbook register to reflect new deposits and withdrawals. Then, at the end of the month, compare you bank statement balance with your checkbook register balance to make sure everything is accounted for. You can do this manually or use a budgeting software. The point is for the two balances to match at the end of every month.
4. Lower your biggest spending categories.
What is eating your money? If you need to make a significant budget cut, look at your spending and cut the largest spending categories. You can be creative on how you do it. For example, you can shop at a cheaper grocery store, downsize, or cook more at home instead of eating out. Just be careful that you do not encourage deprivation because this may lead to a budget blowout due to frustration.
5. Save more.
Aim to put more into your savings account this year compared to last year. You can accomplish this goal in multiple ways: either have broad goals like increasing your savings by a certain percent or specific goals like building an emergency fund. Both will help you reach your financial goals sooner.