Living on a budget is much different than just making a budget. A lot of work goes into putting your budget to work for you to achieve your financial goals. If your budget is tightening due to a drop in earnings or the higher cost of living, it may be time to reassess those initial goals. However, there are several things you can do to help yourself succeed.
Tips for Living on a Budget with Success
There are many benefits to working to save money. To do that, you need to consider your goals, establish an emergency fund, and ensure your monthly income matches your expenses. Even if you have a tight budget, there are a few things you can do to improve your ability to stick with it and achieve your goals. Here are some tips to help you get started.
Create a Strong Budget Mindset
One thing many people do not think about when creating a monthly budget is that they need to have the right mindset going into the process. Realize that establishing and meeting a budget is not always easy to do. It takes work, but saving money and achieving your long-term goals may be worthwhile.
Write down what it means to you to budget. What do you want to gain from budgeting? The key here is to focus on the positive. Understanding the good that can come from having and sticking with a budget is critical.
Be Honest With Yourself
If having a budget is making things difficult for you right now, consider why that is. For example, if it is because you have to limit buying the things you need, then you may wish to adjust your budget. On the other hand, you may have to re-teach yourself how to spend money wisely. That’s going to take some work, and at first, it could be very challenging.
Ask yourself a few key questions to help you to get on the right track:
- What is the first feeling you have when you consider budgeting?
- What specifically is it that you do not like about budgeting?
- Have you written down the benefits that budgeting can bring into your life?
- How can a budget help you achieve your financial goals?
- Has the budget you have now helped you to reach your goals – even in a small way?
- What fears do you have about making a budget and sticking with it?
Having a budget like this is not meant to be limiting or too stringent that you cannot follow it. Rather, it is a path to achieving your long-term goal. If your mindset isn’t very positive and you are not so sure that you can stick with it, really take the time to examine what’s happening and why.
Set Up a Budget That Is Realistic
One of the most common mistakes people make in the budgeting process is this one – they do not create a realistic budget that they can stick with. If your monthly expenses are more than what you have allocated in the budget category, then that is going to set you up to fail.
Take a closer look at your specific spending habits. Do they align with the numbers you wrote down? With food costs, car payments, and other expenses on the rise, your budget may be failing because your goals are unrealistic.
How can you improve those goals, then?
- Make your budget work by adjusting how much you put in each budget category. Be sure that you’re allocating the amount you are commonly spending there.
- If you have a small budget, trimming back and cutting some of your costs may be necessary. Without any wiggle room, you could limit your ability to stick with it.
- Be sure you are using your actual income to create your budget. Don’t forget to take off taxes, health insurance, or other costs you pay out of your check before it reaches you.
Analyze your budget on a routine basis. If you have a zero based budget in place, you need to pay close attention to it each month to be sure it’s accurate. If not, such as if your expenses are too high, it may be critical for you to increase your income or make other adjustments.
Find Ways to Trim Back to Have More Money in the Budget
As you look at the budget categories and try to determine where you are going wrong, realize that you may not be. Sometimes you may need to find more money to add to your budget. If you do not have enough money coming in, look for ways to cut back on costs as a first step.
Here are some key recommendations for doing this:
- Get rid of streaming services. These are one of the biggest draws on a person’s budget and expenses that are often not realized unless you have money to put toward them, take them out.
- Look for free services. For example, you may qualify for a free phone and service from EASY Wireless. If you do, that is extra money you can put toward your budget.
- Eliminate other costs, like a gym membership that you do not technically need to have. It is not easy to get rid of items like this, but until you can get control over your budget, cutting back on these types of expenses can help you.
- Look for lower cost health insurance and car insurance. You may be able to reduce your costs significantly without losing coverage.
- If you have a car payment, consider finding out if you can refinance it. Or sell a very expensive car to pay off the loan. Then, purchase a more affordable option.
- When buying household items, go for the off-brand and really evaluate whether or not you need that purchase before making it.
- Save things like eating out for special occasions. This way, they are more meaningful to you, and they can help you to keep your bills paid with that extra money. You can also find ways to get free or discounted food.
Each one of these tips is difficult to do. Yet, depending on what budgeting method you use, they could be critical. You can often add back services that you want and need later.
Carefully Consider Your Money Habits
Perhaps one of the other more difficult steps in living within your means and meeting your budget goals is this one – look at your money habits and find out what’s going on that you can improve.
Look at your bills from the last month. Take a closer look at not just where you are spending money but why. Here are some practical steps.
Small purchases are hurting you
Some people may not be keeping track of small purchases they make throughout the month. For example, you may be handing cash to your children to buy something at school. You may find yourself making small but frequent impulse purchases, such as snacks at the gas station.
These things can seem small, even if they are just a few dollars. Yet, they are very common and one of the most expensive mistakes you can make. That is, to make your budget easier to manage, limit any spending outside of the range you set.
Solution: Use the envelopment system. With this method, you will put cash into each envelope for a specific goal for that month. That way, you cannot spend more than that. This will teach you self-discipline over time.
You make purchases based on feelings
Are you spending money based on your feelings rather than on your needs? This is another really big problem. You’re not alone in that making purchases because you’re sad, overwhelmed, or frustrated is very common.
Many people refer to this as retail therapy. While it sounds like a good way to blow off some emotions, it typically leads to financial complications later. It definitely makes budgeting harder.
Solution: Analyze what you are feeling and why when making a purchase. Are you buying something because you hope it will make you feel better? If so, consider not spending the money and instead talking to a friend.
Making payments late
Another way you could be creating financial struggles for yourself happens if you pay bills late. This hurts you in several ways.
First, it often means that you are now paying more because there is a late fee you have to cover. That makes the debt more expensive for you to pay when necessary. Second, it can hurt your credit score, especially when credit card debt or other debt is reported to your credit report. That means you may pay higher interest rates later.
Solution: There are two steps to improving this. First, set up a specific time of the month to pay your bills. You can do this every other Sunday, for example. Second, set up automatic payments with your lenders and other expenses whenever possible. That way, the money comes out of your bank accounts directly on the day they are due. You can’t be late, then.
You haven’t taken steps to find savings options
Have you analyzed your tight budget to find areas where you can save money? If you have not done that yet and your monthly expenses are limiting your financial success, make the decision now to make changes.
You may feel overwhelmed by this process, and it may be difficult to go through and find ways to save on expenses. Yet, it’s worth it.
Solution: Set up some time this week when you will focus on ways to trim your budget back. You may wish to do this every few months on a routine basis.
Here’s one thing to do right now. Check out EASY Wireless. You may qualify for a free mobile phone and plan. If you’re paying $50 or more a month in cell phone costs, making the switch is easy to do.
Then, go on with your cable or streaming services, utility bills, health care coverage, and other debts. Set up some time to do this now, looking at all of your expenses.
Not planning for non-monthly expenses
Another struggle some people have is not planning for bigger expenses that are not monthly bills. For example, you may create envelopes for all of your utility and other monthly payments, but you have not done so for things like your property taxes, big insurance payments, membership services, and other costs you pay one or two times a year.
Solution: Work through your finances for the last year. Pinpoint any of these purchases that you may make one or two times a year. This could include higher costs, like taxes, but also things like buying school clothes or holiday spending. Determine how much you are spending in these areas each year. Then, divide that by 12 and put it into your monthly budget. Create envelopes for these expenses that just hold onto the funds until the payment is due.
Choose a Budgeting Method That Works for You
Not everyone will do well with a zero based budget. Some people benefit from using the envelope system because having cash on hand is easier for them to manage than trying to use numerous spreadsheets.
Determine the various methods of budgeting available to find the one that is best suited for your needs. Here are some of the most common methods to research and compare:
- Budgeting by paycheck
- Zero based budgeting
- Cash envelop system
- 50/20/30 budgeting system
- Weekly allowances
Adjust the way that you are budgeting to help you to achieve more of your goals. When you are living on a tight budget, it’s important to make the process work for you too, not just the numbers.
It is also important to know when to reach out for help with personal finance. Reaching out to a financial expert to ask for insight into the options that could help you could give you more insight into opportunities for you. Using the wrong method limits you. However, talking to a professional that can provide you with very specific insight into your financial situation could be very valuable.
The Need for More Income
Living on a tight budget is difficult for everyone, but for people who are just not making enough to meet their financial goals, it is time to consider the options for increasing income.
That’s not easy to do – not everyone can earn more. Yet, there could be a few things you can do to help support your financial growth. Consider the following options. Could any one of these areas help you?
- A part time job. Getting a part time job and then putting that first paycheck towards paying off debt or paying for specific costs can feel great.
- Earn extra cash from side jobs. You may be able to find a side task to do that could help you save money and earn more. Babysitting, doing yard work, helping a friend with their work, detailing cars, walking dogs, and consulting with your knowledge may help you. Some people work in delivery services. Others do better finding a work from home job. This could mean added cash.
- Ask for a raise. Talk to your current employer about the options to raise your income. They may be able to help you with meeting your budget goals with extra hours or a raise.
Look for local help in expanding your skills
If income is the problem, be sure to reach out to resources that may be available to you, too. This could include turning to local groups and nonprofit organizations that can help you with job training, going back to school to get a certificate, or apprenticeship options. Most cities have public and private organizations that can support your effort to improve your income and living wages.
Some programs work closely with community colleges, local trade schools, and professional organizations to help people to get the education and support they need. Seek out these groups in your local area. Many are county-based.
Work to Increase Savings
If you are living on a tight monthly budget, it can feel impossible to save money. How can you do that when you are struggling to meet your goals?
The problem here is that unexpected expenses can create financial hardship that sticks around for a long time. For example, if you need to pay $300 to have your car repaired, that could throw off your entire budget. Yet, if you do not get the car fixed, you may be unable to go to work.
What do you do then?
- Pay the minimum you can on everything else. That includes your credit card statements and medical bills. If you have a high car payment, call the lender to ask for longer payments. Do the same with your mortgage. Bring your costs down as low as you can.
- Work to build an emergency fund. Ideally, you want to have $1,000 in an emergency fund that will help cover these types of costs. It can take time to reach that level – and that’s okay. Anything you put into this fund stays there until there is a true emergency.
- Re-examine everything you are spending money on, even the grocery budget. Can you cut back on any of these living expenses to allow you to put money into an emergency fund for a few months?
Be sure that the emergency fund is in a bank account you can access but one that you do not easily use. Keep it separate from other funds. Then, with each pay period, funnel even a few dollars into this account. Over time, that builds up, and it can save you a substantial amount in the long term when an emergency hits.
Utilize Tools That Can Help You Save
In some situations, managing a budget is not difficult because of a lack of funds. Rather, you may find that it is just downright hard and time consuming to manage the actual budget process. You may hate tracking all of those payments and carefully paying attention to your spending.
A lack of focus on your budget could be one of your bad habits. You can change this, too, and that will make budget management easier. Consider a few tips for better managing your money.
Use an app
There are a range of budgeting apps available today that could help improve your ability to manage spending. Apps such as Rocket Money allow you to track spending in real time. Some will log into your bank account to stay up to date on all of your spending. They can then show you where you are spending and if you are meeting your goals. With this app on your phone, it’s super easy to stay on top of it.
Your bank account may offer an automatic savings tool. This will allow you to move money into your savings bank account when you are paid. If you are paid biweekly, for example, it will transfer the amount you elect directly to your savings account every time your paycheck hits. This way, you do not spend what you should be saving, and you are able to make deposits to your savings with good consistency.
Create a Better Personal Finance Future
Living on a tight budget is not easy to do, but it can help you achieve the financial freedom you want and need. For that reason, really examine your current financial situation. Determine where it is you are facing limitations. Then, get some help. You can work with an accountability partner, like a friend, to help each other stay on track or turn to a professional for more insight into managing your debt.
Once you create a budget, you have a good estimate of where your future goals should be. Put the hard work into reducing the simple mistakes – like late fees, not saving, or increasing your debt. Over time, and with a lot of hard work, you’ll find yourself in a much better financial situation.
Learn how to eliminate your monthly cell phone bill. Check out EASY Wireless to get started.