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How to Stick to Your Budget in 5 Simple Steps

Mar 01, 2021 5 min read Emma Siemasko

Key takeaways

  • A budget doesn’t have to negatively impact you.
  • Saving toward an emergency fund is a critical goal.
  • But don’t put off saving for retirement.

 

The word “budget” used to make my skin crawl. I associated it with restrictions, like a diet for my life. But these days, after experimenting with a number of strategies, I find it empowering.

Now I’ve realized that having a budget can actually alleviate stress and provide room for flexibility in my spending. After all, if I know I have the money to splurge on a pair of shoes, then I don’t feel guilty about the purchase.

I’m not alone—the “B” word can set off alarms for many people. Some of us actively avoid creating and maintaining a list of income and expenses (and how to make them meet, hopefully with money left over). Others have one, but struggle to stick to it.

 

 

Here’s how I’ve changed how I think about budgets—and a plan that you can make your own.

 

  1. 1. Redefine how you think of a budget

    For years, I figured that if I made a budget, I’d wind up saying goodbye to my local coffee shop, shopping on weekends, and going out for dinner and drinks with my friends.

    The first step in budgeting is to redefine what it means for you. Budgeting doesn’t have to be something for rich people with six figures in the stock market. It doesn’t have to be something you hear about on TV. Most importantly, a budget doesn’t have to negatively impact you.

    You should think of a budget as a way to make the most of your money. Budgeting sets you up for life’s big goals, such as getting married, buying a house or getting out of debt. It also allows you to live the life you want to live—one where you’re not stressed about money and can do the things you enjoy most.

     

  2. 2. Set up a system—once

    I used to have a boss who meticulously cataloged everything he spent. Even when he went out to buy a sandwich at the office, he’d update a budgeting spreadsheet.

    This might work for some people, but to me it seemed awful. That’s why, if you hate budgeting, it makes sense to set up a system, check in on it on a weekly or monthly basis, and live your life in the meantime.

    For example, you might decide that you’re going to track all your spending through an online account, which automatically categorizes purchases into various categories. When you set up the account, you’ll add in fixed costs, such as your student loan and car payments. Then you’ll add in variable costs such as the amount you’ll spend on groceries and eating out at restaurants.

    Once you’ve set up your system, you can set aside 20 minutes a week to check in on how you’re doing.

     

  3. 3. Save toward a goal

    The cool thing about money is that when we’re smart with it, we set ourselves up for the life we want. For example, if you want to propose to your significant other with a diamond ring, buy a house with a backyard for your pup or pay off your student loans, budgeting can help you do it.

    Even saving for emergencies is an important goal. And even though recent events have spurred Americans to save more, the Federal Reserve reports Opens in new window that nearly four out of 10 adults could not cover an unexpected expense of $400 without selling something or borrowing money.

    However, if you’re already saving significantly toward a goal, if your car gives out tomorrow you probably won’t panic about how to afford that new transmission.

     

  4. 4. No matter what, throw something at retirement

    Saving for retirement? Yeah, that seems like one of those things you can just put off. Turns out, the earlier you start saving, the better. (Thanks, compound interest!) So, when you turn 70, you’ll be much better positioned to buy a comfy place with a guest bedroom in Florida if you want.

    Unfortunately, nearly half (46%) of nonretired adults have no retirement savings at all, and almost two-thirds (64%) expect to retire with less than $10,000 to their names, according to a 2019 survey by GoBankingRates.1 This means most of us aren’t doing a great job saving for our future. The best course of action is to put something—anything!—into a retirement account.

    If you’re living paycheck to paycheck, make sure at least some of each payment goes toward saving for retirement. If your employer provides a workplace retirement account like a 401(k), you may be able to contribute savings through payroll deduction. (It’s often automatic, but if not, make a point to do it yourself.) If you don’t have a plan at work, open an individual retirement account (IRA).

     

  5. 5. Set up a budget that works for you

    Everyone is different, so the budgeting system that works for me might not work for you. Not only do people make varying amounts of money, live in varied types of environments (rural, urban, suburban) and have differing family situations, but we also have different personalities.

    Here are some strategies to consider:

    • Cash (or debit card) only

      —Believe it or not, people spend up to 83% more when they use credit cards rather than cash.2
    • Automated spending tools

      —Many online tools will automate your spending. You can also set up automatic transfers within bank accounts for example, moving money from a checking account to savings.
    • Personal goals

      —Goals can be extremely motivating. If you want to save up for a down payment on a home,  position yourself to do so. Rather than coming up with a vague goal, such as “I’d like to save $5,000,” think of a way to make your goal come to fruition, such as setting aside $250 per month.
 

What you can do next

Confront budgeting head on, and learn about the things you don’t understand. A great place to start is at the bookstore or library, online or off. Today’s financial writers are doing a great job demystifying finance to make it understandable, approachable and decidedly unintimidating.

Footnotes

  1. 1Sean Dennison, “64% of Americans Aren’t Prepared for Retirement—and 48% Don’t Care,” GoBankingRates, Sept. 23, 2019
  2. 2“Cash vs. Credit Card Spending Statistics,” Shift Credit Card Processing, updated January 2021

 

Emma Siemasko is an entrepreneur and freelance writer who has her own consulting company.

 

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