If you struggle to manage your monthly family budget, you are far from alone. In fact, according to a recent survey, although 66% of Americans have a monthly budget, 70% of these people struggle to stick to it.
Why exactly is this?
It’s simple. Managing your money is a skill that needs to be learned just like any other. No-one is born magically able to budget. You need to need to be taught what to do and what not to do.
Feeling a little bit better already?
Once you have finished reading this article, you will have learned how to:
- Pay your essential living expenses
- Keep your debts manageable
- Start a rainy-day fund
- Avoid money-induced stress
So, what are you waiting for? Let’s get started!
Stop burying your head in the sand
If you are the kind of person who rarely checks their bank account and just spends as and when you need to, then this initial step may be a challenge. That being said, it is a crucial one. If you want to effectively manage your monthly budget, you first need to know precisely what all your incomings and outgoings are.
If once you have done this, you find that your monthly outgoings are more than your incomings, you may want to consider looking into loans for debt consolidation. This would allow you to consolidate outstanding debt into a single payment and could possibly reduce your overall monthly payments by lowering your interest rate (note: extending your loan term can lower monthly expenses but will likely cost you more over the life of the loan).
Think about what you want to accomplish in terms of your finances.
Do you want to live a debt-free life?
Do you want to save money for a vacation or home improvement?
Or do you simply want to stop wasting money?
Once you have established your main financial goals, you can then set out a plan with clear steps about how you are going to achieve them.
It is important to set short- and long-term goals to ensure that you are able to plan for the future as well as the present. Short term money goals may include starting a savings account or cutting back on your weekly takeout. Long term goals may include paying off your mortgage or buying your own home.
Categorize your expenses
As a general rule, your expenses should fall into three separate categories:
- Fixed expenses such as your mortgage and rent
- Variable expenses such as groceries and gas
- Discretionary expenses such as entertainment
If you are struggling to cover the cost of your expenses every month, then discretionary expenses need to be the first to go, or at the very least, be substantially lowered. It may be tough, but it is better than getting into further debt and causing yourself more worry and stress.
Sorting out your monthly finances is an ongoing task, and even once you have mastered the basics, you still need to be vigilant when it comes to spending. It is easy to slip into old habits and to start accumulating debt again, especially once you start to see your finances pick up.
At this stage, it can be a good idea to re-look at your financial goals to help motivate yourself to continue to be money savvy and to avoid the common pitfalls of debt.
However, don’t beat yourself if you make a mistake or overspend. People make mistakes. It is how you learn from them that determines how you manage your money in the future.