Change Your Life With These 3 Budgeting Strategies

Money management is a skill, and for many people, it takes a conscious effort and practice to start feeling like you have the hang of it. Luckily though, organizing your finances isn’t difficult, but it can be tedious, which is why many people skip over creating a budget but wonder why they aren’t reaching their financial goals. These tips will help you create a plan for yourself so that you can gain full control over your money and be able to do things that you truly enjoy or set out to do.

1. Needs & Wants

One of the most significant distinctions that people need to make when learning how to budget their money is to understand needs and wants and take a deep look at what constitutes each of them.

For example, you’d be correct to say that food is a need – you need to eat to survive. However, most people don’t need to order food or eat out frequently, but they actually mainly want the convenience of it. 

Dining out adds up very quickly; at first, spending $10 on a meal doesn’t seem scary, but when you spend this multiple times per week, it can take a toll on your balance in your bank account.

It’s okay to order food once in a while, but that’s what creating a budget is for. The same goes for entertainment as well – you can have a budget for this, but you have to be able to determine how much of it is a need and how much is a want.

By doing so, you can set aside money for bigger long-term plans or have resources in case an emergency arises in the future.

2. Take Care of Your Debts

Another common issue that people have when creating a budget is that they don’t allocate enough funds to repay the debts that they have.

Credit cards and student, car, and home loans are among the most frequent debts that people have, and they must be repaid. Most of the time, they also come with interest, and this percentage can vary between each type of loan.

However, credit cards are usually the biggest issue that people have because of their accessibility and ease of use, and unfortunately, people often just pay the minimum payment and try to forget about it because they would prefer to have more cash on-hand.

If you set aside more money to repay these types of debts, you would actually have more money in the long run because you would eventually not have to pay interest once the balance gets to zero.

This means that you’ll have more money in your pocket to do the things you truly enjoy, and when you don’t have debt looming over you, you’ll feel less stressed out. Nonetheless, this is a process that can take plenty of time and requires resilience, but starting to prioritize them will make a huge difference.

3. Savings & Investments

Lastly, it’s a good idea to put money into savings accounts or to make investments because these are things that can make you more money over time.

However, in order to do this, you will most likely need to create a budget specifically for this purpose, and typically, sorting out your needs and wants first and paying your debt down will give you more freedom to set money aside specifically for this purpose.

Here’s an example – if you have about $3,000 each month, you may find that you spend about half of that on your needs, 30 percent on your wants and the remaining 20 percent typically goes towards debt repayment and investments. This is also known as the 50/30/20 rule that was popularized by Senator Elizabeth Warren.

That remaining 20% of $3,000 is $600, and even if you divide this up, you might be able to make significant progress on paying debt and having some left to invest in your future.

Because of compound interest, you’ll be glad you were able to set aside money to do this, since years from now, you’ll probably have more than you imagined.

Conclusion

Having a stricter budget can potentially solve a good chunk of your financial woes, and hopefully, these three tips can help you start to organize your funds appropriately so you can reduce debt and be able to afford the things that matter most to you. However, you will need to figure out what the essentials are first, but once you do, everything else should begin to fall in place.

Marie Miguel Biography
Marie Miguel has been a writing and research expert for nearly a decade, covering a variety of health- related topics. Currently, she is contributing to the expansion and growth of a free online mental health resource with BetterHelp.com. With an interest and dedication to addressing stigmas associated with mental health, she continues to specifically target subjects related to anxiety and depression.

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