Managing your money and making sure your bills are paid on time can be stressful—especially if you’re experiencing a shortfall or not saving as much as you’d like. According to a recent Klarna survey of Millennial and Gen Z consumers, 37% feel anxious when it comes to their finances. Nearly half (41%) admit to worrying about their financial situation daily, while more than a quarter (26%) say they stress about money at least once a week.
If you can relate and would like to get a better handle on your finances, creating a budget is one way to take back control. All too often the “b” word gets a bad rap. For many, taking a hard look at their income and expenses seems overwhelming. Others believe that establishing a budget means they’ll have to deprive themselves by embarking on a financial diet.
Rather than view a budget as a daunting document that ultimately places limitations on your lifestyle, consider it a roadmap that not only shows you where your money goes but also helps you steer your cashflow so you can get to where you want to go, financially speaking. Need more inspiration? Consider this: In a 2021 Debt.com survey of more than 1,000 Americans, 88% said that budgeting helped them get or stay out of debt.
To get started, consider these tips from the Consumer Finance Protection Bureau (CFPB) for setting and sticking to a budget.
Determine your income.
Whether you have a full-time job or a few side hustles, begin by figuring out how much money you have coming in each month. In addition to a paycheck, some employers offer benefits such as flexible spending accounts, which allow you to save pre-tax dollars in an account and use those funds for certain out-of-pocket expenses like health care or dependent care costs. The CFPB recommends using an income and benefits tracker to get a complete picture of how much money you’re bringing in each month so you don’t overlook anything.
Evaluate your expenses.
From mortgage and auto loan payments to groceries and utilities, you may feel like you have a good handle on where your money goes each month as it leaves your wallet and bank account. But chances are, there are some expenses that may not be at the forefront of your mind. To avoid forgetting key costs, the CFPB recommends using its spending tracker. Be sure to include even the smallest expenditures (afternoon lattes, we’re looking at you!) to get an accurate feel for your budget. Once you have a clear idea of fixed (think rent or mortgage) versus variable (dining out, entertainment) expenses, you can decide where you can cut costs should you need or want to do so.
Keep an eye on the calendar.
As you evaluate your income and expenses, consider the timing of each and how one impacts the other. Whether you pay your bills online or by mail, you don’t want to miss the due date. If you’re skipping payments or failing to make them on time, you’re probably getting hit with interest charges and late fees, which will hurt your bottom line at the same time it may negatively impact your credit score. CFPB’s bill calendar offers an at-a-glance look at when payments are due so you have time to prepare and rein in spending as needed. By comparing weekly, bi-weekly and monthly income to bill totals and payment due dates, you’ll always know where you stand financially.
Bring it all together.
Once you’ve gathered all your information, keep it in one place like a budget worksheet so you can figure out how much money you have left at the end of the month or how much more you need to bring in to meet your financial goals.
Staying on top of your budget.
For some, creating a budget is the easy part—sticking to it is another story. As with adopting any new habit, it may take a little time and trial and error before you feel completely comfortable. The CFPB recommends the following to help you succeed at sticking to your budget:
Use the tools that work best for you.
There isn’t a one-size-fits-all way to create a budget. While you can use the worksheets the CFPB offers, there’s nothing wrong with keeping an old-fashioned ledger or journal. As long as you’re reviewing your income and expenses regularly and staying on track, you’re on the right path.
Get clarity by taking an overview.
After you’ve established a budget and have all the figures in front of you, you’re better able to see where you can make changes if you’d like to spend less and save more. A budget is a fluid document so don’t be afraid to adjust it over time as your needs shift.
Whether you’re saving for a large purchase like a home or crave the peace of mind that comes from establishing an emergency fund, setting financial goals is easier once you have the complete picture in hand. After you’ve determined what you’re working toward, you can reward yourself in small ways to help maintain your momentum.
Seek out support.
If you’re struggling to stick to your budget, or falling behind on your bills, don’t be afraid to ask for help. Organizations like The National Foundation for Credit Counseling® offer free assistance from Certified Financial Counselors who can assist you in creating a budget and a personalized financial action plan.
When your finances are out of control, it can have a negative impact on your mental health. With that in mind, creating a budget and staying on top of cashflow needs to be a priority for more than just your financial well-being.