Putting together a realistic budget is one of those to-do list items that feels daunting for many people. However, getting a handle on spending, saving, and education expenses is one of the best ways to make living on a budget effective. That is why we want to provide you with some tips for building a budget.
Putting together a budget
The first step in living on a budget is to categorize your expenditures. Cobalt CU has a budget worksheet to get you started.
The first step is to be honest about your spending. Make a list of all your regular monthly bills, like rent, mortgage, education expenses, utilities, and insurance, food, etc. That way you can understand your typical spending habits currently. It can also be helpful to do this while looking at your credit card or checking account to see what those expenses truly have been.
It is common for people to use their debit or credit cards for small purchases throughout the month without realizing how quickly this can add up.
Forgotten expenses
Many items go unaccounted for when it comes to budgeting. Consider items that you spend money on throughout the year, even if they do not necessarily go toward your bills.
Pet expenses: People often forget about their pet when budgeting. Vet bills, food, and treats can be quite costly.
Gifts: Do not just budget for major holidays. Consider birthday gifts, hostess gifts, and any other gifts you know you will need to buy or events that might come up.
Vacations: Too often, people fund vacations with credit cards. Instead, budget throughout the year for your annual vacation and you will not have to dread the post-vacation credit card bills.
Budgeting to put money aside for these and other expenses can help you stay on the right financial track.
Do not forget education expenses
Many people realize they should include student loan payments within their budget, but also think about future education spending for advanced degrees.
It can be a juggling act when trying to budget for college while also thinking about education expenses for your kids. Those who do think about it will put funds aside for their children first because scholarships and grants are harder to come by these days. Funding an education for their children is a priority starting early and looking at different savings options.
Pay yourself first
When working out your budget, pay yourself into your savings first instead of waiting to see how much you have left over at the end of the month to put into savings. A savings account should not be an afterthought.
Annual checkup
Even after you have established a budget, plan to thoroughly review your budget each year, and see what needs to change. As you get started or as life events occur you may need to reevaluate more frequently.
Living on a budget can help you cover expenses as painlessly as possible, whether you are budgeting for education expenses, a vacation, or just paying your living expenses from month to month. Hopefully, these tips for building a budget can help you on your journey to financial success.
