Budgeting 101: How to Build and Maintain A Healthy Budget
No matter what phase of life you’re currently in, making smart financial decisions are key to a successful future. This is especially true if you’re planning to purchase a home, whether it’s within a year or several years down the road. The best way to set your finances up for success is to set a budget. While it may seem daunting, there are many tools out there to make setting and sticking to a budget quite simple! Below, we’ll discuss how to create a budget that works for you plus share some wonderful tools you can use to make the process even easier.
Why Do I Need a Budget?
Pretty much everywhere you turn, you’ll hear financial advice on setting a budget – and for good reason. It’s important to know where your money is going so you can make sound financial decisions. For example, you may be spending much more than you even realized on luxuries like dining out or shopping, so setting a budget can help you reel in your expenses.
Most of us have certain goals we’d like to achieve, whether it’s booking a tropical vacation, buying a car, or purchasing a new home. Budgeting can help achieve these big goals by minimizing unnecessary expenses and deciding how to allocate your money once your fixed expenses have been paid for.
How Do I Begin Setting a Budget?
The hardest step is deciding to start budgeting – once you commit to it, you’ll realize there are so many great tools out there (we’ll share some below!) to help you stay on track. The very first thing you should do is track your expenses for at least a month, but preferably two to three months so you can determine an average for your expenditures. Simply taking this step will be eye-opening and show you where your money is going!
Next, once you can see how you spend your hard-earned money, you can determine which of your expenses are fixed (such as rent/mortgage, car payment, utilities, etc.) and which are variable (entertainment, shopping, food, etc.). While fixed expenses are harder to reduce without making a drastic change, variable expenses can be cut as needed. You may find that things like meal planning can help reduce your grocery bill or having a date night at home instead of at a restaurant can save you some cash. Identifying these variable expenses will be key to determining where you can cut back or reallocate your income to save for big goals.
How Do I Maintain My Budget?
Of course, budgeting doesn’t have to mean cutting out all of the fun luxuries in life! You can still enjoy your favorite things, but maybe with a bit more intentionality behind them and not as a daily occurrence. You may even find that you enjoy your cost-effective choices more, such as investing in a coffee or espresso machine to create homemade lattes instead of purchasing a $6 cup from a coffee shop each day. One of the keys to maintaining your budget is to leave some room for fun expenses. Perhaps you can set aside $50 per month and decide how you want to spend that money after it multiplies over a few months. There are so many ways to make budgeting a positive experience that will help you grow your finances!
What Tools Can I use to Make Budgeting Easy?
Fortunately, creating a budget nowadays is very simple. There are a plethora of tools and apps out there that can pull in your financial data in real-time to keep your finances at your fingertips! With that said, you can always track your budget old-school with a pen and paper or even a simple spreadsheet if that fits your needs best. If you prefer something a little bit easier to maintain, here are some great options:
- You Need a Budget (YNAB)
- Good Budget
- Pocket Guard
- Personal Capital
These apps pull in your real-time finances across multiple accounts to see where you stand financially. You may also find that your bank offers a budget tool within its app or website, which may be a great option to keep you on track with your spending!
At C&F Mortgage, our local industry experts are here for you at every step of your homebuying journey. Whether you’re ready to buy or still need some time before you take the plunge toward homeownership, our team will guide you and provide the advice you need to make the biggest (and smartest!) financial decision of your life. Contact us today to learn more!