Writing a budget is already a good thing. You can take it a step further by prioritizing your budget to maximize the yield of your financial effort. Here are some tips to help you get started.
1. Put money on your retirement fund first.
Retirement should be your priority unless you are in extreme debt. It does not matter how far away it is – you need to start now. Make monthly contributions to your retirement fund, or even better, take full advantage if your employer offers a matching contribution.
2. Clear high interest debt.
This mostly pertains to credit card debt. Any high interest debt should be a priority. Otherwise, you are spending thousands just in interest! Did you know that the average credit card interest rate is 20%? This adds up quickly and eats money that you could be saving instead.
3. Begin your emergency fund.
After paying your debt, start an emergency fund to protect yourself from creating future debt. This fund will cover unexpected expenses that may arise, such as a major medical bill or car repair and an unexpected job loss. How much should you save? Getting at least three month’s worth of expenses is a good start. You can build it up to a year to give yourself security.
4. Evaluate your saving goals.
For sure, you have multiple saving goals that find their way into your budget. Assess them individually and prioritize them based on their relative costs. Start by writing your list and tallying the costs. Divide the cost by its deadline and adjust accordingly. It is likely you will not meet them all. Be realistic and edit your goals to match your budget and your immediate needs. This does not mean cancelling goals completely. Adjusting may simply be pushing the deadline back a few months behind. The point is to make it realistic and find ways for you to reach your saving goals without overwhelming yourself or falling short in essential categories.
Money management is not easy but you can keep working on it to ensure you are moving in the right direction. Finding a balance is the key. After all, money only moves two ways – in and out!