If you want to take steps toward financial stability, creating a budget is a big way to achieve that goal. It is a way to keep track of all the money you have coming in and what you want to buy with that money.
A budget can be a big eye-opener because it can shine a light on expenses you may not think twice about. While it may seem like a lot of work, once you establish a routine, it will become easier as time goes on.
Use Credit Cards Wisely
Credit cards can be great, but the most important thing to remember is that you have to pay that money back with interest. If you’ve never had a credit card before, it’s important to know how to use it before you max it out. One of the biggest tips to owning credit cards is to only spend what you can pay off each month so you can avoid paying any interest. It’s easy to get into the habit of just paying the minimum monthly payment, but if you only do that, you could get hit with crazy interest charges in the long run.
A good rule of thumb is to have your credit utilization at 30% or less across all your credit cards. If you go above that 30%, your credit scores can take a big hit because of your credit utilization score. If you don’t think you can pay back what you spent the following month, work on saving for the item instead of using credit.
Make the Most of Your Travels
If you’re someone that likes to get out and do things, take advantage of everything your city has to offer, especially free attractions such as parks. For example, if you live near Downtown Chicago, Illinois, you can plan a day trip there instead of spending money on an expensive attraction. The city has a lot to offer, and you will find many free things to do, like walking down to the waterfront. The city you live in might also be home to a lot of hidden gems; you just need to do some research and get out there and explore.
Keep Track of Finances
Creating a solid budget helps you figure out where you are spending your money. Many people have certain expenses that they can easily cut out to have more money to put into savings or to help pay off debt. When it comes to money, every little thing adds up over time. It can cause financial problems you may not even be aware exist.
Some small expenses may seem completely harmless, but if you add up how much they’re costing you per week, per month, and even annually, you may be in for a complete shock. Certain things like small monthly subscriptions, daily trips to your favorite coffee shop, or weekly Target splurges can add up to a lot more than you realize.
Work On Building Your Savings
When you start spending less money on things you don’t need, you may have money left over at the end of the week. While extra money sounds great, you don’t want to go crazy until you have an emergency account.
Everyone should have a savings account. Money in savings is a good way to plan for emergencies such as medical bills or other unexpended expenses. Make sure you have enough money to cover three months of bills in your emergency account.
Have Clear Goals Set
It’s good to have a clear goal in mind for why you’re budgeting to make the budgeting process successful. That can help you stay motivated and on track. One goal to have would be to have X amount of money set aside for a vacation you’d like to take. What you can do is figure out how much you’ll need and then factor in how much you’ll need to save per paycheck to make it happen.