Making the decision to start budgeting is one of the first steps to getting your finances in order and keeping them there. But sometimes it’s easier said than done.
After all, there are several steps to the budgeting process. In addition, you can find financial advice from many different sources, some of which contradict one another.
To help sort everything out and keep you from referencing multiple documents at once, here is a list of do’s and don’ts for the first time budgeter.
Do’s for the First Time Budgeter
1. Do give yourself a little wiggle room in your budget.
Build in some flexibility, such as allowing a little bit of your money to go toward entertainment. You can choose later if that entertainment is going out to eat or to a movie or some other fun activity. Creating wiggle room can keep you on budget.
2. Do search for low cost or free options to replace some of the things you are currently paying for.
For example, try DirecTV Now for watching television instead of cable and save money.
3. Do use apps.
Apps make it easier to budget and manage your finances. One to try is Personal Capital. It’s free to use and pulls in all of your accounts so you can see everything in the same place at the same time.
4. Do plan ahead for bills that fluctuate.
Heating, water and other bills may change from month to month or season to season. Make sure you set aside enough to cover what you owe during higher usage months.
5. Do set financial goals.
Some of your financial goals might be things such as saving for a new car or saving for retirement.
6. Do create priorities for using your money wisely.
For instance, you may need to pay debt down before you are able to set aside money for a newer car. It’s not wise to continue paying interest on debt when you could be paying it off faster.
7. Do pay more than the minimum on debt you owe.
Paying extra is the only way you will ever get ahead, especially if you have high interest debt, like credit cards.
8. Do automate paying bills whenever you can.
This way you ensure you don’t miss a payment so you can avoid being charged late fees. It also takes a few more things off your never-ending to-do list.
9. Do re-evaluate your budget.
You should re-evaluate your budget every six months to a year to account for any major life changes. For example, if you got married, your bills probably changed drastically. So, you need to budget for the changes.
Don’ts for the First Time Budgeter
1. Don’t be inflexible when it comes to what you want.
You may have to give a little to create a workable budget. For example, you might have to cut back on salon visits or exercise at home instead of paying a gym membership.
2. Don’t forget to set aside money for emergencies.
There is no way to plan for some things that happen in life. If you plan ahead for financial emergencies by saving money in a rainy day fund you will be able to cover them when they happen.
3. Don’t overlook annual or irregular bills.
Some include taxes, doctor bills, dentist visits, eye doctor appointments, car repair bills and more. Set aside money for these expenses each month in a saving account. Then, when you have bills come up periodically for these bills, you will be able to pay them.
4. Don’t neglect to take into account deductions that are taken on your pay.
Calculate your budget based on your net income and not your gross income. You should at least have taxes that are coming out of each paycheck and possibly retirement contributions and health insurance too, among others. What’s left is your net income.
5. Don’t stop budgeting if you get off track one month.
Instead of giving up, look at where you went wrong and why. Try to prevent it from happening again, and get back on track.
6. Don’t use someone else’s budget for your own.
Your own needs will be different and your bills will likely be different too. You need your own budget tailored to your needs and expenses.
7. Don’t procrastinate when it comes to paying your bills.
Paying them on time can save you money in late fees. Instead, use that money to pay down debt.
8. Don’t try to keep up with the Joneses.
It doesn’t matter what your co-worker, neighbor or family member has or does. Trying to keep up with others makes you spend more and puts you in debt.
Budgeting is an important part of financial well-being. If you are a first time budgeter, use these dos and don’ts to help you create a budget that works.
What other do’s and don’ts would you include in this list?
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