January is half over and you still have not made good on your resolution to improve your budget? RelayRides blogger Amanda L. Grossman can help you honor your promise.
Does the word “budget” make you want to hit the snooze button? The thing is, while people tend to view budgets as constrictive and controlling, they actually are a tool to put you back in the driver seat of your finances. And the person who has control over their finances is well on their way to fulfilling their goals and dreams.
It’s a New Year, and I want you to give budgeting another look with these five tips in mind.
Pick a System that Works for You
A budget that stays on paper and never actually gets implemented is not going to work. Fortunately for you, the days of budget implementation being confined to checkbook registers are over. Sure, you can still use this method if it works for you. But I’m here to open your eyes about the many other methods to consider.
- Tangible Tracking with Cash: If you are looking for tangible systems to keep track of the money you allot to each category of spending (gas, groceries, entertainment, etc.), then think about a set of envelopes or jars. Each month you visit your bank and withdraw enough money to fill each of the categories with the amount of cash allocated in your budget.
- Tangible Tracking without Cash: Not looking to use cash? You can take advantage of prepaid gift cards. Load a set of prepaid gift cards (one for each category, or one for several categories lumped together) with the amount that you are allowed to spend for that month. When the money is gone, it’s gone.
- Reward Point Maximization: If you have a lot of financial discipline, then you can use credit cards to maximize reward points. Add up the amount of discretionary spending you have allocated in your budget, and check your account weekly in order to get to the end of the month before you get to the end of your money. Also, you need to pay the credit card off before the grace period of 30 days is up in order to not be charged a fee or interest (thus negating any ground gained by earning reward points).
Allow for Some Wiggle Room
Sometimes budgets fail. In many cases, it’s because the budget did not have built-in breathing room. If you set your budget tightly by planning each category down to the penny, then you leave yourself no wiggle room. Let’s face it: life needs a little wiggle room. To give you a tool to use in the event that one or more of your categories requires more spending in one month, create an “Other” category in your budget. This category can accommodate both spillovers in months when you have money left over from one type of spending, as well as absorb extra costs in the months when you need it.
Don’t Forget the Important Categories that Will Further Your Goals
Budgeting is not all about prioritizing spending, though it may feel that way if your paycheck is stretched thin. You need to remember your goals, your dreams, and your future when you set up a budget. Paying your bills is extremely important; however, so is retirement (it’s going to happen for most of us), an emergency fund (you never know what life will throw at you), and a slush fund (everyone wants to have a little fun, right?).
Carve out some space for each of these goals, even if you are not sure where the money is going to come from at the moment (see below). By creating a category for each, you are more likely to find something to start stashing away. And your future self will thank you greatly.
Work on Boosting Your Budget
Who says you are stuck with the money allotted in your budget? After you set the parameters and work from your current income, it’s time to look for ways to boost your budget. An easy way for car owners to do this is to make money off of your car during the times it would normally sit idle in your driveway. For example, with peer-to-peer car sharing company RelayRides, you get to decide who will rent your car, when your car is available for rent, and how much you wish to charge on an hourly or daily basis. Owners make an average of $250 per month back into their monthly cash flow!
Looking for even more ways to boost your budget? Check out these modern day odd jobs.
Periodically Reassess the Situation
Your life changes on a yearly, monthly, and sometimes daily basis. This means that the way you spend your money will change as well. At least every six months to a year you need to reassess the budget you originally set for yourself (or even sooner if you are having problems with implementing it). Don’t be afraid to shift money around from one category to another as your priorities, needs, and life circumstances change. Making your budget relevant to your life is absolutely key.