Why should you budget?
- Once you understand how money flows in and out of your life--you can better see how to reach your financial goals.
- A budget can help you identify unnecessary expenditures and find ways to redirect funds towards your priorities. For example, if you don't realize you spend $80 per month on lattes, it will be much harder to break that habit and apply that money toward a priority, such as a family vacation.
- About one-third of Americans have no retirement savings, and many of those that do have a retirement fund don't contribute enough. Budgeting even $100 per month can increase your retirement nest egg by as much as tens of thousands of dollars. This is reason enough to aggressively pay off debt, as interest payments can easily exceed $100 per month and prohibit you from enjoying a comfortable retirement.
- It never hurts to have a little extra money in your emergency fund, and budgeting can help you save more so you can sock away extra cash for a rainy day.
Top tips to stay within your budget
- Make a record of how much you owe so you can prioritize debt repayments.
- Keep a close watch on bank balances to avoid bank overdraft charges.
- Keep a record of all credit card purchases.
- Always pay more than the minimum payment on credit card bills if you can.
- Stick to one or two credit cards at a time.
- Consider transferring balances to a lower rate card, making sure the low rate applies to balance transfers. (Be careful of transfer fees.)
- When borrowing, use the lender that offers the lowest interest rate.
- Check the small print of loans and other credit to find out about all fees and potential increases in repayments.
- Be wary of 'buy now, pay later', 'interest-free' financing and similar offers that postpone debt.
Take it to the Next Level
Once you have a clear view of your overall financial picture, you can shift your focus to aggressively eliminating debts and building wealth. Simply put, pay off your debts. Pay them off, and you’ll be saving those high interest payments. Once you’ve paid off one, start putting the payment from it toward the next debt that you owe. It will snowball… Just ask Dave.