Hate crunching numbers and writing down every expense? Does it seem like every time you try to budget and track your spending habits you just get overwhelmed and lost? You’re not the only one. While budgeting is good for everyone, it’s not easy for all of us. Instead of going all in and spending every cent on paper before you even get your pay check, perhaps you can try a different approach to see if it works better for you. Start simple.
Here is how to create an easy spending plan in 5 simple steps:
1. Decide your financial goals
For this first step, decide what your financial goals are. The big ones. What are you saving for? Do you need to pay off debt? Make sure all your goals are realistic and achievable.
Goals for your money will help you make smart spending choices. Ask yourself: What do I want my finances to look like in one year? Decide what’s important to you and start there
2. Identify your income and expenses
You probably know how much you earn every month, but do you know where it all goes? Don’t worry, you won’t be tracking every cent you spend. All you’re going to do is write down all your outgoing costs, utilities, car payments etc, and subtract it from your monthly income. That’s all spent in advance. Now you can decide where the rest of the money goes. Don’t forget a budgeted amount for grocery basics.
3. Set aside your savings/ pay off debt
Now that you know where most of your money is going you can decide how much you can/want to spend on your long-term goals. Set it aside, pay off debt, or whatever you need to do with it, and the remaining is yours to do with what you like. No need to track every cent. All the bills are payed and you saved $.
4. Evaluate your situation
You payed your bills and put money toward your long-term goals but it’s not over. It’s up to you to decide where your finances are right now and where you want them to go. If you can afford to put more towards your goals and cut out some of the unnecessary spending you do every month, do it. Skip Starbucks some days, don’t do that clothing haul you were going to, find alternative ways to save. Make a list of things that you need versus things that you want and decide, like a grown up, what your priorities are.
5. Make it a habit
At the end of every month review your finances and remind yourself what your goals are. Checking up on everything regularly will help making spending wisely a habit. Remember, start simple. Teach yourself the habit and self control of spending wisely without giving yourself a headache over number crunching and overspending.
Do not save what is left after spending, but spend what is left after saving.