The reality is that businesses, households and people perform better when they stick to a budget.
A budget is just another way to say that you have a plan for your money. A plan for your money simply means that you have a purpose for each dollar, or a place it will go.
Once you have a budget, you may find that funds can be redirected for other purposes, or at least give you a better picture of where your money is going. What many people find is that once they create a budget, they feel a little bit better about their financial health. Knowledge can truly be power, as they say.
Starting out the new year with a budget is a good way to start. However, there is never a bad reason to begin with your budget at any time during the year.
Here are five tips for budgeting in 2021.
- Find your “why” and write it down. It seems like there is a very small portion of the population that is supernaturally organized in just about everything they do. If you are not one of those people, expect that maintaining a budget can be a little tedious at times. Therefore, it is important to determine a reason for why it is that you want to budget your money. It may be as simple as taking a special vacation this year or making some improvements to your home. It may be a much larger reason, but either way, find your reason. It will help you maintain the discipline and focus to make your budget successful. Your reason will ultimately help you stay motivated in the tough times.
- Track where your money goes, at least in the beginning. A budget is only as effective as your efforts to stick to it. While it’s not difficult to assemble each monthly bill that you pay, it can be a little bit difficult to accurately predict expenses that don’t reoccur as often or that may be made in frequent small increments. It’s a good idea to begin your budget by logging your expenses and then using those expenses to construct your budget. You may be surprised to see where some of your money is going, and placing a healthy limit on a particular category may help you pay down debt quicker or increase your budget in another area.
- Never be afraid to trim your budget. There have been countless news items about avocado toast and expensive lattes. While these stories may be a little exaggerated, the premise hits at a small truth. You will often be surprised at where your money actually ends up. A simple daily expense can compound into a monthly expense, well above what you expected. Trimming your budget is a way to help get those budget areas under control, and this will pair up well with tracking your money at the start of the budget process.
- Use automated transfers to do some of the budget work for you. If you automate at least a portion of the budgeting process, it will make the overall task a little easier. Use tools like internal transfers to send your money, on predetermined cue, to a savings account. You can also take advantage of features like Billpay to schedule your monthly bill payments, taking a little bit of stress off of your mind. By automating this part of your budget, you can gradually reduce your worry and stress about having enough or remembering to pay each bill on time. When your money is already budgeted for that item, it will be there when you need it. By scheduling your bill payments with Billpay and setting up automatic transfers, you are less tempted to borrow that money for something else, or make an impulse purchase that might lead to you getting behind.
- Understand that each month is different. Your budget will need to include items that might only occur during certain times of the year. This can be seasonal items like clothing or holiday purchases, but also could be other items like birthday presents, vacations or car taxes. You can budget for these items in a way that you understand. You may want to divide the budget amount over twelve months, or you may choose to lump the expense in a single month. Either way, each month may have specific expenses that are unique to it, and that’s okay. As long as they are accounted for, then that is what matters.
If you resolved to start with a budget or set a goal to have one, then these tips will help you travel down the right path. Having a plan for your money gets a little bit easier when you take intentional steps. First Palmetto Bank offers many tools for better management of your money, including internal transfers and Billpay. First Palmetto Personal Online Banking even offers the ability to automatically categorize your spending, which can make budgeting even more simple. Good luck with your budget!