Building a Budget: 5 Tips for Staying on Track Financially

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Creating a budget is an essential, yet often overlooked, pillar to achieving financial stability. Budgeting can help you to prioritize your spending, prevent overspending, save for the future, reduce financial stress, as well as provide a sense of control over your finances. With inflation costing the average household an additional $296 every month, it’s important now more than ever to take a proactive approach to controlling your finances.

Even if you’re familiar with budgeting, it may be a daunting task to create and maintain a budget – let alone consistently stick to it. That’s why we created this article to help you understand how to create a realistic budget as well as tips for ensuring you meet your financial goals.

1. Understanding Your Income and Expenses

When creating a budget, it can be easy to focus on only tracking expenses rather than income. But, it’s just as important to track all sources of income for your household as well. Doing this will help you create a more complete budget and can help you prepare for tax season.

It’s easy to think you have a clear understanding of your spending habits. But, once you sit down and take inventory of all fixed and variable expenses – you may be surprised to find your spending habits are different from what you had in mind. Having that clear understanding of your spending habits will help you create a more realistic budget that compliments your lifestyle.

The first step to tracking your expenses is keeping records of your monthly expenditures.

Fixed expenses are recurring costs that are the same each month, such as rent or mortgage payments, car payments, and insurance premiums. Unlike fixed expenses, variable expenses are subject to fluctuating month to month. This can include groceries, holiday or birthday gifts, utilities, transportation, and entertainment. All of the expenses listed above should be tracked and reviewed on a monthly basis. Juice cardholders can simplify tracking and managing expenses by downloading the Juice app on the iOS or Google Play store.

If the idea of tracking all of these different costs overwhelms you, consider using a budgeting app or spreadsheet to help you automatically categorize and track expenses over time. Find a budgeting app that works for you with this comprehensive list Nerdwallet put together.

2. Setting Realistic Financial Goals

Having a realistic financial goal can help you prioritize your spending and avoid splurging on unnecessary temptations. It also provides you with the ability to measure your progress over time. Being able to see how far you’ve come can help you stay motivated and committed to achieving your goals.

When setting financial goals, using the S.M.A.R.T. acronym can help you create a strong foundation you can build upon.

S – Specific

M – Measurable

A – Achievable

R – Realistic

T – Time-bound

Another way to help set realistic financial goals, especially for long-term goals, is focusing on creating progressive shifts. This gives you the room and flexibility to grow and adopt new habits as you work towards your goal. For instance, if your goal is to make an expensive purchase down the road, you can start by putting away only a small percentage of your income. Once you’re more comfortable with reducing your spending habits, you can incrementally increase the amount you’re saving for this purchase.

Don’t let unexpected expenses throw you off track and discourage you from achieving your financial goal. It’s less about if a financial surprise will occur and more about when. Accepting the fact that there might be setbacks to achieving your goal will allow you to quickly overcome any obstacles.

Without the guidance of a budget, overspending and underspending are more likely to happen. Not only does budgeting help you achieve your goals, but can be helpful for setting goals as well. With the clear picture a budget can provide, you can easily determine if the goal you’re setting is S.M.A.R.T..

3. Creating a Budget that Works for You

When choosing the right budget, here are two common methods to consider.

  1. The 50/30/20 method offers the flexibility to pay off debt, cover current expenses and save for future expenses. It divides your income into three categories: 50% goes to necessities, 30% for wants, and 20% for building savings and paying off debts.
  1. The Zero-Based Budget method provides a detailed and deliberate approach for those who have the habit of overspending or for the diligent planners who enjoy a strict strategy. This type of budget requires you to allocate every dollar you earn until there are zero dollars left. A zero-based budget can be time consuming and adopting this method may be difficult if your income varies from month to month.

With these two methods in mind, reflect on your current financial situation, financial goals, spending habits, as well as how much time and effort you’re willing to commit to expense tracking. Keeping these things in mind should allow you to choose the budgeting method that works best for you.

4. Staying on Track with Your Budget

Once you’ve chosen your budget, the next step is staying focused and on track to reaching your financial goals. This requires you to regularly review your budget and make any necessary adjustments. Without this upkeep, monitoring your progress is nearly impossible to do.

Your path to achieving your financial goals will not be straight, you’ll most likely run into some unexpected hurdles. It’s okay if this happens, as long as you aren’t discouraged and recommit to your budget.

Common challenges you’ll likely experience while budgeting are unexpected expenses like car repairs or medical bills. Building an emergency fund into your budget can help you prepare for these kinds of concerns. While reflecting on why you’re budgeting in the first place can deter you from making any frivolous purchases. Or having a visual representation of your financial goal – perhaps on your fridge or mirror – will remind you what you’re working towards and help you stay motivated.

Reviewing your budget on a monthly or bimonthly basis will help you identify what areas could use improvement, if you’re going to reach your goal in a timely manner, or if it needs to be adjusted to a later date. Throughout the year, you’re bound to have recurring expenses that fluctuate, taking changes like this into account are essential to having a complete understanding of your finances. Consistently reporting your expenses will help you achieve this transparency.

5. Build Your Budget with Confidence

Budgeting is a powerful tool that can help you gain more control over your finances while allowing you to achieve your financial goals. While the steps to create a budget may seem lengthy – like taking the time to thoroughly assess your income and expenses and choosing a realistic goal – you’ll be thankful for an accurate and attainable plan later.

Attempting to achieve financial stability and success without a budget is like trying to drive to an unfamiliar destination without directions. It’s easy to get lost, and you may be late or never arrive at all. A budget provides guidance and clarity that’s essential to understanding and improving your financial situation.

Take charge of your finances and put yourself in a position to succeed!

If having more control over your finances is something that appeals to you, consider using the financial tools and benefits offered to Juice cardholders. If you’re an existing Juice cardholder, be sure to download the iOS or Android app. Doing so is a great way to stay “in the know” with your income and spending. And if you’re not already with Juice, consider talking with your employer today about the many benefits Juice offers employees and employers alike!