Here are four ways to build the momentum you need to help you move forward in your budgeting process:
Build an Emergency Fund
Probably the most important rule of budgeting is to have an emergency fund to help when something unexpected comes up, such as a car, refrigerator or dishwasher breaking down. Here are the key features of an emergency fund:
• Aim to have 3-6 months of living expenses saved
• Keep separate from your checking account
• No (or very low transaction fees)
• Easy access
• No penalties for withdrawals
• Interest earnings on the balance
Pay YOURSELF First
Besides building an emergency fund, you next most important rule with budgeting is to make sure you are contributing to a retirement savings account. Whether it’s a plan offered through your employer or an Individual Retirement Account (IRA), make sure you pay yourself first through an automatic payroll deduction via your employer or through an automatic monthly transfer of funds from a personal bank account (in the case of an IRA).
Stop Eating Out So Much
Occasionally treating yourself to an evening at a brewpub with friends is totally fine, but the savings can really add up if you start cooking at home more. Strive to plan out a weekly dinner menu and make sure you make enough for lunch leftovers. Before you head out to the grocery store, make a shopping list. Only buy the items on the list!
Find Cheaper Gas & Entertainment
Consider using a good gas locator app, such as Gas Buddy, which helps you find the cheapest gas anywhere you are. To get the best discounts on local entertainment and attractions, consider Living Social or Groupon. And if you like concerts, consider getting a ticketing app, such as Ticketmaster or Live Nation. Becoming a member of these services can get you access to valuable presales and exclusive money offers.
Budgeting Apps
Whether it’s a New Year’s resolution, a spring clean-up or a mid-summer or fall project, it’s always a good time to look closely at what you need to do to improve your budget. If you need help getting organized, there are several budgeting apps available out there, such as:
• PocketGuard
• YNAB (You Need a Budget)
• Wally
• Goodbudget
Use Your Net Worth to Benchmark Your Progress
As you get better with your budgeting, you’ll find you have more money for investing and paying off debts. But just how much better are you getting with your budgeting? Calculating your net worth is a good way to gauge your current financial health and your progress over time. It is simply taking the value of what you currently own (your assets) and subtracting what you currently owe (your debts). Just think of it as a snapshot that shows where you are financially at a given point in time.
To help gauge the current value of your home, you can check out online resources such as Zillow, Redfin or Realtor.com. For your car, you can try Consumer Reports, Edmunds or Kelley Blue Book.
If you took a picture of your finances a year ago, today and a year in the future, you could probably see a trend. Assuming you are doing all the right things, your net worth should grow year by year. As you save and invest money, that money has the potential to grow (in a good year) and you continue to pay down your debts, including your home mortgage. In addition, there are several online net worth calculators that you can access for free, on sites such as NerdWallet, Simple Dollar, or Kiplinger.
