Having a budget is one of the top financial tips on almost every financial website. It’s the first step in managing your money. While that seems like a simple task, many people don’t even know where to begin. And they’re not alone!
My son recently got his first full-time job. Benefits, retirement – the whole thing. He had received his first few paychecks when I asked how his budget was going. I was met with a blank stare. It was at that moment that I realized I had failed my child. As open as my husband and I are about our finances, we never showed our children how we built our budget.
I reached out to Todd M., TTCU Branch Manager, to ask how he helps members build their budgets. He first explained that people often have two big misconceptions about budgets:
- Misconception #1: Budgets are restrictive. The truth is that a budget allows you to achieve your dreams.
- Misconception #2: Budget building happens overnight. The truth is it can sometimes take several weeks to build a strong, realistic budget.
Below are more tips Todd shared –
- Track every penny you spend. You can’t budget unless you know where you spend your money. You might think you spend only about $50 each month dining out. But once you track your spending, you might be shocked to find you spend double or even triple that amount.
- List all recurring, fixed expenses. These include things such as rent or mortgage, car payments, subscription services, childcare, etc. And don’t forget retirement contributions!
- List your variable expenses. These are items that vary by month or even week; things such as groceries, entertainment, utilities, dining out and gas.
- Once you’ve tracked your expenses for a few weeks, look at where your money goes. If you are struggling to make ends meet or want to save more for retirement, your variable expenses are a good place to make adjustments.
- Find a system that works for you. Many people use the envelope system, either using actual envelopes or an app. Others may opt for the 50/30/20 system or a different method altogether. The important thing is to find a method that works for you, and that you can stick with.
- Do a “budget check-in” every few months. Does your budget still work? Have your life circumstances changed?
You really can take control of your finances. It just takes a little time and some effort. But it doesn’t have to be overwhelming or frightening. And if you want a little help, TTCU is ready to lend a hand.
And as for my son, he has since built a budget that works for him and he’s thriving.