Budgeting is not a noble effort. For as long as there has been money, people have used a budget to save and stay on top of their finances. Men and women from all economic backgrounds work hard to budget to make their ends meet, but the budget-savvy take it a step further. They make their budgets work for them by using their budget as a tool to reach their financial goals. When you learn the 7 habits of the budget-savvy you will avoid the common pitfalls that many people face, stay on track and reach your financial goals faster.
1. HAVE SIMPLE AND SANE BUDGETS
A complicated budget can drive you crazy. The budget-savvy keep it simple and remain sane. They establish a guideline budget for their expenses and savings, and then stick to it. Their budget covers everyday living expenses for things such as housing costs, food and transportation and miscellaneous expenses of importance like getting a haircut or tickets to a sports event. They create a savings goal. One example might be to have 20% savings goals to save for retirement account, college or an emergency fund. In this case, 80% of their income would go to fund their everyday living expenses. Then, they would divide or allocate their spending to match their guideline budget.
2. BUDGET FOR A GREATER PURPOSE
People are purpose driven. They do not budget just because it is popular or necessary; they budget for a clear purpose. This is a fundamental habit. They set long-term goals that drive the purpose of their spending. Some examples of budgeting for a purpose include establishing a savings fund to take a dream vacation or buying a new home. It is hard to get off track when you have a worthwhile reason for doing what you do.
3. CREATE A MISSION STATEMENT
The Budget Savvy are on a mission. Once they have established a greater purpose for their budget, they create a budget mission statement. Here’s an example: “Our mission is to live below our means in order to visit the following places on our bucket list: Italy, the Caribbean and Spain.” Once they establish the mission, they live by it, and it reflects in all of their spending decisions. Anything off-target like a Vegas trip with the guys or girls might be considered off target and is avoided.
4. ASK QUESTIONS
The budget savvy ask questions. They question every purchase as to whether or not it is necessary and in-line with their budget. If it doesn’t add up, they do not buy it. They never forgo the opportunity to ask for discounts from their merchants and service providers.
5. THE SAVING MONEY MINDSET
In line with being mission-driven, they are habitual savers. They invest at least 10% of their income in interest-bearing accounts. If their company offers a retirement savings plan, they are in it: investing at least up to the company’s match. They also have an emergency fund equal to at least three months of expenses set aside. This habit establishes their mindset.
6. WISE SHOPPERS
Prior to shopping, they look for deals online and in local ads. They clip coupons, mail in rebates and buy in bulk, if necessary to secure savings. They are often members of shopping and buyers’ clubs. They eat before they grocery shop. Before they make a big purchase, they investigate their options by getting referrals and recommendations from friends and online reviews websites such as Yelp and Consumer Reports. They will always negotiate with sellers and merchants for the lowest price if a product or service is not on sale.
They use technology to manage their money. They use apps to track and control spending and daily living expenses. They may also use software to track their total financial portfolios. They have smart phones and install apps to compare prices, track spending and save money. Some apps even provide them with product reviews.
Maintaining a budget is more than making a noble effort or doing something because it is trendy; a budget is an effective tool to reach your financial goals. When you begin to use the practice the habits of the budget-savvy, you’ll reach your financial goals faster. Avoid the pains and pitfalls of busting your budget and get started today.