The Budget. It’s what’s going to help you become more fiscally responsible, save more money, and help you achieve financial freedom. At least that’s the hope.
However, many people don’t take it seriously enough. Keeping a budget is looked at a lot like starting back at the gym. Many of us start one but rarely follow through. According to a 2015 survey from Bankrate, 82% of Americans say they keep a budget. That’s great, right?
Well, not so fast. Bankrate’s survey found out that while a majority claim they keep a budget, they don’t have the best budget practices. One-third said they “scrawl it out on paper” while another 20% just do it all in their head. That only opens you up to disaster.
We like to think of budgeting as an art where you can be creative and tailor your practices to your life. So in honor of Financial Literacy Month, let’s kick things off by talking about how you can accomplish the task many Americans can’t.
Why are budgets failing?
First of all, let’s address the problem. You’ve probably read a lot of articles on the benefits of budgeting, but do you know why your budget might be failing? Let’s talk about that right now.
You aren’t setting goals. When you don’t set goals for yourself, you aren’t giving yourself a reason to stay committed to your budget. If you don’t know what you’re working towards, you tend to just give up out of frustration. Another reason might be that you’re setting goals that are too broad. Setting a goal of “getting rich” is great, but it will be hard to stay on track and might lead to you and your budget breaking up.
You gave up too early. Budgets take time. If you’re hoping to see results in a week or two, you’re going to be disappointed. Making a budget might require you to change some habits, and we all know how difficult that can be. Budgets are all about trial and error, so don’t be discouraged when it’s been 3 months and you haven’t found that sweet spot. It will happen eventually.
You lack financial education. This is a growing issue that too many Americans are facing. According to the 2016 National Capability Study, an estimated two-thirds of Americans couldn’t pass a basic financial literacy test. Knowing the ins and outs of budgeting is essential to creating a budget you know you can stick to.
What can you do about it?
Lucky for you, there’s a lot you can do to put yourself on the road to becoming a master budgeter.
Brush up on your financial knowledge. Knowledge is power and having the mindset of always wanting to learn will only help you succeed. With that being said, do you know what goes into a budget? We’re glad you asked because here’s a quick rundown.
- Determine your after-tax income.
- Subtract necessary expenses you already know you’ll have to make.
- Incorporate your optional expenses like “wants.”
Have you heard of the 50/30/20 budget? Financial experts recommend you spend 50% of your after-tax funds on necessities, 30% on wants, and at least 20% goes to saving and debt payments.
Be specific when setting goals. Not only should you have a large overall goal, it makes staying motivated easier when you have smaller goals you want to meet along the way. Set a goal to save so much each month or work to pay off specific amounts during a certain time frame. You’ll be surprised at how meeting those goals will fire you up to stick with it and want to reach your bigger goals.
Stay with it. Yes, this is easier said than done, but have patience and give yourself the time to work out the kinks and make the changes you need. Don’t set yourself up to fail and set the bar insanely high. Start small and gradually work your way up while making adjustments here and there. You’ll find a strategy that work for you.
Utilize technology. The internet is full of resources that let you plan and maintain a budget without having to write it down. If you’re used to doing everything online, this should be easy for you. Programs like FinanceWorks gives you a dashboard view of your budget so you can see where your money is going.
Now, if you like going old school and working a spreadsheet or physically writing it down, there’s nothing wrong with that.
If you want to bounce ideas off someone else, our Personal Finance Officers would be more than happy to sit down and work out the details.
So there you have it! With some time and a little personal touch, you can have a budget that will help you get where you want to be!