Before you try to make a budget, forget everything you think you know about what it will be like.
"The first image that comes to most people's mind is dieting or imprisonment," says Jesse Mecham, founder of the budgeting software You Need A Budget. "What we try and get people to think is, budgeting is not about being handcuffed. It's really about being liberated."
Making and keeping a budget can be empowering, and maybe even fun. We have six strategies to help you track your spending and make better decisions about your money.
1. Don't budget just because you think you should.
Set a specific goal that has meaning to you, like paying off a credit card or saving for a vacation, says Kristin Wong, author of Get Money: Live the Life You Want, Not Just the Life You Can Afford. "Now you have a reason to say No to that $50 dinner, because you have something to say Yes to now," Wong says.
2. Harness the freakout.
Big life changes, like a move or job loss, can bring big stress, but you can leverage that anxiety and turn it into motivation to make a budget. "Those moments, where you you have the willpower or you have the energy, you have this motivation," Mecham says. "That motivation is fleeting."
3. Follow the 50-30-20 method.
When you get started, try the guidelines that Sen. Elizabeth Warren helped develop as a Harvard professor. The largest portion, 50 percent, of take-home income should go towards basic living expenses — housing, groceries, etc. Then 30 percent for discretionary expenses, like entertainment and clothes; and 20 percent for savings and paying down debt.
4. Use the power of scarcity.
With credit cards and overdraft protections, "We've gotten really used to the idea that we never really run out of money," Mecham says. Put the designated money in each category, and when it runs out, it's out.
5. A roommate is worth a thousand coffees.
It's unlikely you'll reach your budget goal just by cutting back on coffees. Housing, food and transportation are usually the biggest expenses. Save in one of those areas and you save big. "They're harder decisions to make, obviously," Wong says. "But they give you more bang for your buck."
6. Try different budgeting techniques to see what works for you.
Whether it's a simple spreadsheet or a budgeting app with lots of categories, use the system that works for you.
Here's one easy worksheet to get you started.
Listen to Secrets To Saving And Investing for more on managing your money.
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