Four Ways to Spend Within Your Budget
One of the first steps toward financial freedom is the ability to manage your own finances (cash flow, spending and saving habits). A previous post on this page titled “How to Double Your Savings: The Rule of 72” describes how you can use compound interest to double money you have invested, but you can not invest money you do not have.
When we realize we need more money for any reason, the first instinct is to find a higher paying job or to take up another job. In some cases this is the best choice, but it is important to note that you can "make" money when you reassess your budget. Below are a few things you can do to reassess your budget and actions you can take to stick to your budget and save.
Create a budget that accurately reflects your monthly spending habits.
One of the biggest mistakes people make when budgeting is not accounting for expenses outside of bills like rent, groceries, credit card, gas, insurance, but how often are you spending money buying lunch or snacks while at work? Though this does not mean you have to eliminate extra expenses (that would be how you "make" money) this just helps ensure that your budget is an accurate representation of your spending habits.
This step is essential because if you notice you spend money on lunch at work once a week and enjoy doing that because it gives you a break from the meals you prepared, be sure to add that into the budget. You are less likely to stick to a budget if it is strict and does not allow you to do things you enjoy.
To complete this step, spend as you normally would for 1-2 months and then go through your account(s), including credit card(s) to see what you spend money on in a month and make a note in any form that works for you (this can be in your notes app or an excel document).
Track your spending to avoid OVERspending
Now that you have a budget; tracking your spending will play a significant role in you sticking to your budget. A way to monitor your spending habits is to ask yourself this question before spending money on something that is not in your budget:
“Since this expense is out of budget, where is this money going to come from?”
Things to consider…
Did you make some extra cash that you feel like this expense is worth spending on? Or would you rather keep this money and add it to your savings?
OR
Is this worth spending my savings on, even though I am saving for a house, vacation, or a potential emergency?
Typically, we go over budget because we did not spend time contemplating where the money being spent will come from. Asking yourself these questions will encourage more awareness before spending and hopefully discourage it if it is not within your best financial interest.
Separate your money into different accounts
Staying within a budget can be very difficult if all your money is in one account because you may struggle to distinguish which money is for your monthly bills and what is left. If you can, separate your account into money for bills (this can be your savings) and another for the rest of your expenses. Doing this will allow you to make sure you have the right amount of money for your bills in your account at the beginning of the month and do not spend it. If your finances are complicated, you may consider having several accounts.
Keep your eye on the prize
Sticking to a budget can be hard because it is a conscious choice to go without things you truly want. It is a prime example of delayed gratification because you have to do this now to have what you want in the future.
If you feel like you need to spend money on lunch during the week because you are tired of the meals you prepared to save money, remind yourself of WHY you are doing it while you eat lunch. Maybe you are saving for a vacation or planning to retire early. Understandably, you may not want to miss out on a luxury. If this is the case, you may want to spend this time thinking of side hustles to help expand your budget.
Sticking to a budget is no easy task but having the things you want does not come easy. You have to decide if not putting in the work now is worth sacrificing things you want in the future.
