According to Statisticsbrain, data compiled from the Federal Reserve, the US Census Bureau, and the IRS the average American household has approximately $3,800 in a savings account, 40% are not saving for retirement, and 25% have no savings, at all. These numbers should alarm us all, as they reveal that Americans are in real trouble with our finances. Some of this lack of savings can be attributed to the impact the financial crisis has had on us all.
However, it is time for more of us to get serious about our money and take steps to get our financial house in order. One of the best ways to do this is to create a budget. While creating a budget may not be on your top ten list of things to do on a Saturday morning, it is one tool that can have a dramatic impact on your finances, and allow you to sleep better at night. The following are some tips to help you streamline your budget
The website USDTA states that the average credit card debt per household is around $14,750, and that credit card fees total up to about $20.5 billion a year. Do you know how much consumer debt you owe? What about your monthly, after-tax, income? What is your largest monthly expense? How much do you spend on groceries, eating out, and entertainment per month? These are some basic personal finance questions that unfortunately, many people cannot answer.
In order to begin streamlining your budget, you have to get honest about where you stand. To do this, break out a pencil, paper, and calculator, along with your monthly bills, pay stubs, and bank statements. Going back over two or three months will help you to see where your largest expenses are coming from and how you are allocating money towards everyday expenses, savings, and retirement accounts. While this may seem tedious, it is necessary to understand exactly where your money is going, in order to begin reeling your finances in.
Make a Plan
Once you see where your money is going and exactly where you stand, you are in a better position to build your budget. Now, that you are aware of your financial position, it is up to you to figure out how to appropriately allocate your money, in order to reach your intended goals.
There are numerous programs and apps to help you create and stay on top of your budget. Quicken is a commonly used budgeting program that allows you to put your credit card and banking information in one place. With Quicken you can also organize your finances along categories such as “groceries” “entertainment” “rent” etc. Quicken also provides a day-to-day graph to give you a visual representation of what you are spending on a daily basis.
Another tool that can be used on the go are apps for your smart phone. Computerworld features 10 smart phone apps that help track your spending. These apps range in price from free to upward of $20 per year. Today, you are no longer subject to carrying around a small notepad and pen whenever you want to log an expense. These help save time and effort while allowing you to still remain on budget.
Decide What’s Important
One of the most difficult things about budgeting is the initial stage. You will often encounter resistance, as you curb your spending habits and log your expenses. Writer Holly Johnson, recalls how she and her husband began budgeting once they were expecting their second child, and the resistance she felt in the beginning.
One of the major issues Johnson points out as to why your budget may not be working is because you are not telling yourself “no.” Budgeting, along with everything else of importance, takes time, practice, and discipline. Learning to decide what is of greater importance and tell ourselves “no” when we want to order out, if it’s not in the budget, is key to maintaining our budget. If you see something that you really want, you can build the purchase into the budget for the next month, or begin saving for it. You can build flexibility into your budget.
Budgets are not meant to make life less fun. Budgets allow you to understand where you stand, financially, and you give you a solid plan of how to accomplish the things you want in life. Whether these things are to build an emergency fund, pay down debt, save for education or a family, streamlining your budget will help you get to where you want to go.