Adjusting your budget does not have to be
painful. The first step you should make when you are ready to take a hard look
at your budget is to decide what you will do with the found money. If you
rework your budget but don’t have a plan for that money, you will not truly see
the results of your efforts. There are a variety of reasons why someone may
want to spend less. Saving for a new vehicle, home repairs, or another concrete
choice is easy, as is saving for something fun like a vacation. However, maybe you
want to pay down debt. While not as exciting, it is also important.
By paying off debt early, you pay less in
interest. Also, a low debt to income ratio will boost your credit score. A
solid credit score will provide the best interest rates for things such as
mortgages, auto loans, and private student loans. Private student loans differ
from federal loans in that they do take your credit score in to account when
lending. Excellent credit may allow you to borrow at a lower rate than
even federal loans offer. Also, there is no borrowing cap on private student
loans.
Track Spending
You may think that you know where your
money goes, but once you track every cent, you may be surprised. This can be
tedious, but keep in mind that it isn’t something you need to do forever. A
month or two should be enough to give you a fairly accurate picture of how
you spend your money. There are many apps available that can do this job
for you. Some will even connect automatically to your accounts so you don’t
have to make the entries yourself. While these can be handy as a routine way to
manage your finances, when you are just starting to track expenses, consider
doing it the old-fashion way, with pen and paper. Something about having to
pull out a notebook and record every expense will make it real in a way that
automatic syncing on your phone will not.
Set Aside Money Meant as Gifts
If you receive money as a gift, resist the
urge to treat yourself. Read the card, accept the money in the spirit it was
intended, and deposit it into a high-yield savings account. As an adult, the
best gift you can give yourself is financial security. Setting that money aside
helps boost your savings while also creating a good spending habit.
Create No-Spend Periods
Take one day each week where you decide you
will not spend any money. This should be relatively painless. Don’t plan it for
a day you need to grocery shop, pack your meals for work, and resist the urge
to buy a morning coffee. Stay out of the promotions tab of your email, because online
shopping counts too. Once you are comfortable with one day a week, expand
it. Maybe you can regularly plan for four no-spend days, or maybe you will
dedicate yourself to one no-spend week each month. Regardless of how you
arrange your no-spend days, you will be pleased with how quickly this money
adds up.
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