You have no idea where all your money goes, huh? I’ve been there before. I know it’s frustrating when you can’t seem to get ahead. If you are in this boat, you probably don’t have a budget or at least one that is working for you.
In order to start to making smart conscious decisions about your money, you’ll first need to get an idea of your overall financial health. Creating a budget will help you do just that. Remember, a budget is not a magic wand. It is a tool that will help guide you but it takes some commitment as well.
You probably know the importance of having a budget but sticking to it might now be a priority in your life. It should be and this is why.
Knowledge is Power
If you are completely in the dark about the amount of money you spend and how you spend it, changing your habits will be really hard. Creating a budget will help you figure out exactly how much money you actually need on a monthly basis. Once you have a clearer view of your overall financial picture, you can shift your focus to eliminating debts and start building wealth.
Seeing all your income and expenses in one place will shine the light on your financial situation. Having this knowledge will allow you to create financial plans and reach your goals. Only then can you start making some ground.
Stop Spending So Much
So now that you’ve discovered where your money is going, you’ll be able to start plugging spending leaks. Without a budget you might have not realized that you were spending $60 a week ordering lunch from Seamless. Or that the fact that you do means you’re going to come up short when your cell bill is due.
To plug up your leaks, you will have to track everything; even it is just a latte or a bag of chips. These little purchases can add up to hundreds of dollars each month if you are not paying attention.
Part of the process is learning how to make better decisions. Creating a budget will help you realize the difference between needs and wants and soon you will often be asking yourself, Do I really need to buy this?
Knowing what you will have at he end of each month after expenses will help you control impulse purchases and stop you from buying things you don’t need or can’t afford.
Get our best money lessons:
Clear Your Head
It might be super scary to see where all your money is going at first, but it is the only way to start making progress and stop stressing. Good or bad, once you know what your situation looks like, and you can plan accordingly. You can now spend time fixing any problems and celebrating achievements.
Knowing your financial situation will lift a significant amount of stress from your life. The fear of the unknown will be washed away. You won’t have always to be thinking about it. Stop losing sleep over financial hardships. Take control.
We all know money issues are one of the biggest causes of divorce, so if you and your spouse start working together towards fixing the family finances, it can also take a lot of stress out of the relationship.
Keep Your Eye On The Prize
Creating and maintaining a realistic budget will help you figure out what your long-term goals are and help you work towards them. Stop buying every shiny thing you see because you think you deserve it.
You will never save up that money for a down payment on the house, that dream trip Italy or a comfortable a retirement. You don’t want to work forever, do you? Start mapping out your goals, get it your finances on order and keep track of your progress and save the money you need.
Stop wasting time and start today. Creating successful spending and savings plans will allow you to simplify your life. You will be able to see all of your finances in one place and depending on what tools you use to budget, you don’t have to do any or much manual entering. The transactions are pulled in for you. Mint is perfect for this.
You can also track goals within your budget. Maybe you’re saving for a vacation. You can create a category for that and watch it grow. Try it for one month, use Mint because it’s the easiest way to get started. Making a budget is the first step to taking control of your money. If you need some help using Mint- just follow our step by step guide, Mastering Mint.
Creating a budget and sticking to it involves some discipline and at times sacrifice, but it will help you develop smart spending habits so you can better manage your money into the future. Be sure to keep your budget updated to reflect changes in your life, a new job, marriage or a child.
Build Meaningful Wealth
Manage your cash and investments in one place. Sign up for Personal Capital to keep track of your money and optimize your investments. They have a 401k Fee Analyzer to help you choose the right funds for your 401k as well as an Investment Checkup tool to help you diversify and reduce fees. I had no idea I was paying over 1% of my assets in fees every year – these tools helped me dramatically reduce that.
Once you have all of your accounts linked you can leverage their Retirement Planner to plot out exactly what your retirement would look like. Using a Monte Carlo simulation they determine how likely it is that you’ll reach the level of income in retirement that you’re hoping for. I’ve found this tool invaluable in my wealth planning and I’ve made some significant changes because of it. I’ve been using Personal Capital since 2013 and since then I haven’t found a better free online tool for building and managing wealth.
Mint: The easy way to budget.