How to Use a budget to Save Money
"How does a budget help you to save money?" A budget is a system that can guide you as you make decisions and provide you with a way to gain control of your finances.
We're raised more often than not to believe that the word "loan" "stress" and "poverty" are normal.
That to live life you are bound to feel bouts of negative stress, possibly take out large loans to afford college, and become massively in debt to get out of poverty.
But before we throw a 17 year old freshly graduated high school senior or a seasoned adult into a pile of debt for sake of
a business
passion
or education
... lets teach words like "budget" "planning" and "savings"
Budgets are about more than just numbers, spending habits and expenses written on a a piece of paper or kept in a budget app.
Keep reading to find out
Ever wondered how do you create a budget for a beginner? Or maybe how do you start a budget with no money?
Before you can determine how you can change your spending habits you can get organized when it comes to your money.
How to start your first budget
Print your bank statements look at your monthly bills
Here you'll add up your monthly expenses or separate them into recurring pay periods.
For someone who does not belong to a bank but mails out money orders you can always refer to your most recent bills and see what is the most you have paid (if you need to figure out how much to allot) or look at what the reoccurring amount was for the last few months.
These values include
your phone bill
rent
utility bills
transportation (If you have to take the bus this isn't a "want" it's part of your bills)
groceries (although this is an area that can be adjusted, everyone has to eat, place this under bills)
credit card bills
gym memberships
insurance plans
medical co-pay
And depending on your lifestyle you may have more or less reoccurring bills.
Highlight these expenses and determine which ones will come out of your biweekly paycheck, your monthly paycheck, or annually.
From this list you can also see how much you spend.
Later while creating a budget we will be able to see what can be tweaked, adjusted, or eliminated to save you money.
Whats your income?
This includes any allowances, side hustle pay, your regular job, or public assistance benefits.
If any of the values fluctuate it means you would be repeating your budget on a weekly, biweekly, or monthly basis.
I get paid biweekly but at different times of the month I get paid more or less.
This especially becomes true during holiday season when I get paid for 6 days of work per pay period instead of 10.
What's your remaining balance?
"How much should I save" is a great question that doesn't have an exact science to it.
Some people think you should save a certain percentage but I believe it depends on your lifestyle and the availibility.
Eventually you can save a solid 10% of each check and increase this amount but if that is not possible (yet) don't beat yourself up.
We'll keep working to see what adjustments you can make. Sometimes it's a spending problem and not the income that you bring in, other times it actually is due to your income being lower than what your lifestyle needs.
Subtract your bills from your income and see what's left over.
What do you spend money on?
Spending money doesn't have to be on lavish purchases.It could mean a monthly hair cut, getting your eyebrows done every two weeks, items you replace in the house, adventurous food dishes.
Often it's not as specific as $20 on my nails + a $5 tip it's more like I know when I go into family dollar I spend at least $50.
After we have replaced the toilet paper and call ourselves saving money by buying unnecessary items in bulk, we try to just get by until the next paycheck.
Add up all extra expenses and subtract it from your remaining income.
How much money can you save right now?
If you left your life exactly how it is right now, what would you have left to save?
Assuming you calculated the weekly cost of metro cards, or random trips to the grocery store, the mornings where you buy breakfast, and any extra parts of your income that may be loaned or spent on other expected items.
After looking at what is left over this is how we can start our savings right this minute.
Start small, subtract $25, $50, even $100 if you can afford it and put it in your savings. You have now jump started your savings account.
Look over your expenses one more time
Is there such thing as spending too much money? How can you stop spending money?
These are two great questions that once again vary on answer. Is there too much money spent when it comes to your health? No, health is always the key to wealth.
Is there such thing as spending too much on shoes and retail therapy? Yes.
Money moves
1. You should be able to call your cable providers [assuming you don't owe any late balances] and without hassle downgrade your package.
2. Do you spend on average $300 on groceries but walk away with a lot of expensive snacks and new meals to try? Does the food sit in the pantry and collect dust? Next time you go shopping, check your pantry make a list, and then go shopping.
3. Do you take cabs more often than you have too? Start going to bed earlier, wake up earlier, and hop on the bus.
There are usually small adjustments you can make in the beginning such as skipping a nail appointment or not buying food out and you'll see fast money saving results.
$2 each day being saved may not sound impressive but if you do it for 30 days that's $60.
Do it for a year and you'll have well over $360 dollars assuming you keep it up for 6 months.
How does a budget help you to save money?
It gives you control.
We live in a world where there are so many cultural issues, societal problems, and rounds of uncertainty, that finding something we have large say over is crucial to living a balanced life.
To be generous to others we have to feed our own souls first.
You can begin to save without worrying if you have the money to cover an emergency.
How can you save money on a tight budget?
Limit the small purchases you make.
By learning to live on less fun money.
Fun money isn't always dates and nights out or pampering ourselves. It can be the money we spend when we don't have to think as much.
You'll second guess buying a $500 item but it's the little purchases that sneak up on our pockets and drain our wallets of money.
Pay yourself first
Going forward set up a direct withdrawal.
An automated savings account can make the difference between you saving twice per pay period (meaning $50 taken out automatically + what ever is left from the last paycheck) and saving only what is left after spending.
If you don't have a banking account you can keep the money in cash.
Start using cash
There is a whole budget system called the cash envelope system that is best for people who enjoy or need to spend cash.
With this system usually budgeters are able to categorize their money into different areas (bills, fun money, savings etc.) and only spend the money located in that pouch.
And when it comes to it the best ways to use cash and save money... leaving it at home never fails.
Avoid fees
1. Go to the bank instead of being charged ATM fees.
Usually the bank and the ATM will charge separate fees that eat up your money.
2. Pay your credit card bills on time. Interest being charged and late fees added are easy ways to give your hard earned money away.
3. Watch out for the debit and credit minimums charged in stores. If you purchase something for less than the $7 minimum you
Take a break from shopping
Retail therapy is another way to indulge in emotional healing. We all do it but when you can't afford the stuff you're buying it makes for less saving and more consequences.
Reuse your clothes before you buy other ones, see if any of your friends are the same size and would like to swap or give away anything they aren't using.
Invest in yourself
Buy things that make you happy. In my post spend money and invest in yourself, I go into detail on how I began to spend money on items that would save me money and time in the long run.
From the way I exercised at home to how I began to do my own acrylic nails for cheap.
A lot of the times we use a service because it's convenient not because we absolutely need to. What can you do at home for cheap without sacrificing time?
Sell items online
This method of using Facebook Market Place and Ebay to sell used items such as books, clothes, dressers etc. works.
But what a lot of people don't tell you is that it needs time and patience.
You can't expect to list something for a decent price and make a profit within hours. Some products are listed for weeks even months.
Separate wants from needs
When I took the bus to get to college I needed high speed internet to type my essays and submit them while on public transportation.
And now after being hooked up to my lagging home WIFI to do assignments, I still need my data plan to include the best internet speed.
But not everyone needs the most expensive phone plan, they just want it.
You may want to eat a box of Kelloggs Frosted Flakes ($6.99) but do you really need it? A bag of Malt-O-Meal for (2.99) could have the same effects as well.
These are temporary changes until you can have more wiggle room in your budget and spending money.
Have a good support system
Have people who don't believe you are cheap when you decide to not buy something.
Who support your decision to not go out to eat, and do not bring your stress while taking your time and energy.
If they can't get on board, it can be time to place a small amount of distance between the people who are currently making your journey of saving harder.
Bring up finances while dating
Have the tough conversations.
Discuss where they are financially, where they want to be, and what goals they have for the future.
Knowing their income is more or less than yours isn't a deal breaker but it can guide you in knowing what life together could look like once you live together.
Don't get comfortable with things that bring you stress
Jobs
Neighborhoods
Habits
Family decisions/dynamics
Don't allow what surrounds you now to take away from what the bigger picture is.
Jobs are not there to deprive you of your joy and take your time. Yes you need money but there is nothing wrong with taking a step back and using your nights to apply to jobs.
If you can afford for your income to drop temporarily it could even become an opportunity where you can advance in positions and salary quickly due to the skill you posses.
You can begin your own family traditions of spending less on certain holidays.
You can get comfortable with setting financial boundaries every where you go.
Remember you don't have to be an expert
Not everyone is raised in a family where they talk about money all of the time and can think of the future and feel that anything is possible. It may take some getting use to but eventually you will feel your mindset towards money shift and before you know it, you are setting financial goals and reaching them.
If you ever feel the desire to connect with financial experts on your journey of managing your money there are tons of options out there.
But it's important that you know the difference between financial coach, financial planner and an accountant. Lifeat23k does an amazing job at explaining the difference.
In conclusion
You can save money one step at time even if you are a beginner.
Make life easier to handle by having a rainy day fund and you can do more than you ever dreamed was possible.
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How do you plan on saving? What challenges have you faced so far? Let me know in the comments!
