Maintaining financial strength isn’t easy. Expenses come up. Life changes. And you may find yourself falling short of a financial goal, or in debt. Whether you’re in your first job, working your way out of debt or wanting to save for retirement, a focused budget can help you take control so you can reach your goals.
Start a spending journal
In order to budget for the future, it helps to take a look at how and where you're spending your money now. Creating a spending journal is a simple tool that will reveal a lot.
Start by saving receipts from every purchase you make within one month. Write down the purchases in your spending journal. At the end of the month, add up your expenditures in categories like "groceries", "utilities", "gas", "clothes", etc.
Budgeting requires you to be honest with yourself. Write everything down. You'll want to keep at this for a month or two before committing to your budget. Over time, you'll start to see patterns and may identify areas where you're spending more than you want.
Set attainable goals
Creating realistic goals means creating spending rules you can actually live by. It all starts with asking yourself some key questions:
- What do I want?And how much will it cost? The more specific you can be, the better.
- When do I want it? Set a time frame. Is this a short-term, medium term or long-term goal?
- How will I stay on track? Create some accountability for yourself.
A short-term goal (less than 3 years) might be paying off existing debt, like credit cards. Medium term goals (3-5 years from now) might include starting a small nest egg for retirement. Long-term goals (5+ years from now) could include saving money for a car or a down payment on a house.
If you're part of a couple, it's important to make sure your spouse or partner is on the same page, so you can work together toward your shared financial goals.
Keys for cutting back
When you take on the challenge of creating a spending plan, you want to feel positive about what you're working toward, not sad about what you're giving up.
Cut back, not out. You don't want to feel deprived, or become frustrated if you're not feeling immediate success. When possible, give yourself a break. Maybe the answer is to cut back on certain expenditures, not cut them out altogether.
Also, stay focused on your goals. Reminding yourself what you're trying to achieve can go a long way to helping you stay strong and make better decisions every day.
Pay off debt
A great method to use is the “debt snowball ” approach. Look at all your debts, focus on the loan with the lowest balance, and pay it off first. Then repeat. It may seem counter-intuitive to start small, but as those small successes continue adding up, you'll feel energized by the momentum – and confident, too.
Use this calculator to understand how long it will take to pay off your balance
Maintaining your budget
Once your goals are set, and your spending plan is in place, continue to track your spending. The BECU Money Manager, available through Online Banking, makes it easy. You can review your monthly statements, and even see your checking account transactions in real time.
Try to stay close to your spending plan. If it doesn't seem to be working, you may have to revisit and tweak some areas. The point is to make your budget work for you.
Money management tips
As you start living within your budget, you may feel motivated to do even more. Here are our money management tips.
Create an emergency fund
You can't predict the future, so it's important to have money set aside. When the dishwasher breaks or the car goes on the fritz, the unexpected cost won't blow your budget. Start with at least $1,000, and over time build up to 3-6 months' worth of income.
Automate your savings
Move money out of your checking account without lifting a finger by setting up automatic transfers from your checking account to your savings. Put your money in a place where it can help you the most, whether that's saving to reach a goal or paying down debt a little faster.
Give every dollar a job
By allocating every dollar you earn into a budget category, including paying down debt or saving for that vacation, you'll make your money work for you in a way that aligns with your goals and priorities. That adds up to financial success.
Think about needs vs. wants
Do you need that new pair of shoes? Or just really, really want them? Either one is a fine answer. It's just good to recognize the difference, so you can make conscious spending choices that reflect your goals.
It can be worth your time to shop around for better deals on everything from cell phone rate plans, to groceries and entertainment.
Pay more than the minimum due on your credit card
Interest, particularly on high rate credit cards, can be a killer in your attempt to maintain your budget.
Avoid impulse purchases
Shop with a list. Try not to be tempted by things that aren't on it. Those little purchases that seem like nothing can add up to a whole lot before you know it.
Visualize your goals
Finally, remember what you're working towards. Picture your goal. The more you can visualize what it feels like to be in control of your spending and working toward a goal, the better chance you have of making it a reality.
Use this calculator to understand the future value of your savings
This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant. Investments are not federally insured, not subject to credit union or affiliate guarantee, and may lose value.