As a financial planner, I have the opportunity to work with folks of various socioeconomic statuses. No matter who I’m talking with, the conversation always comes down to budgeting. Typically, the topic creates anxiety. Next to dieting, budgeting might be the most dreaded activity in America.
Think of the similarities. Dieting and budgeting require sacrifice. Like dieting, a quick solution is not the answer. Both require lifestyle changes. Feel free to read the rest of this article substituting diet or budget as you are moved. Consider this a “choose your own adventure” story, self-help version.
Before you embark on your journey, make a list. What do you hope to accomplish? What resources do you have? Who can help you stay on track? Are you a visual or analytical thinker? No one solution is right for everyone. Tracking your expenses for three months is an eye-opening experience. I have a client who was shocked when she realized she spent $2,000 per year at Starbucks.
Budgeting Websites and Budgeting Smartphone Apps
There are many spreadsheet templates available online. Mint.com, some banks and credit cards have online products that can help. Several smartphone apps are also available. In addition to mint.com, GoodBudget offers an envelope system. Based on the system your grandparents used, your income is divided into expenditure envelopes. As you spend, funds are withdrawn from the envelopes. Mvelopes is a similar product. Wally allows you to take a snapshot of receipts and can notify you when a bill is due. LevelMoney gives you a big-picture overview, how much you can spend in a given period. Most connect to your bank or credit card, and all can be downloaded for free; although there is often a premium version available for a fee.
A simple method is to keep a small notebook to jot your spending. Save receipts. Use your notebook or receipts once a week to update a master template. Don’t forget to add in those automatic payments and transfers that are paid directly from your bank or credit card. Add your three months’ expenses and multiply by four to get the annual expenditures.
Take a hard look at what you have created. Is your Starbucks category higher than your savings? You may want to consider some lifestyle changes, which may help your waistline, as well. For instance, set up an automatic transfer to your savings. Right now, before you pass another Starbucks.
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.