Learning to Love… Your Budget

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Budgeting: it’s not about slashing your expenses, feeling poorer than you actually are, or even ---gasp--- giving up your daily cup of coffee. It’s about cultivating a symbiotic relationship between your wallet and your priorities. Here are a few quick tips to help you get that relationship off to a strong start.

 

1)    Know the Basics 

Try using the 50-25-25 rule for the basis of your budget. 50% of your income goes to necessities, such as rent, transportation, and groceries. 25% of your income goes to wants, such as eating out, concert tickets, and hobbies. 25% of your income goes into savings, this includes paying off debt, retirement, and short-term savings. Over time these percentages will fluctuate and you’ll find the right groove for your own lifestyle.

2)    Begin your budget with a SMART Goal –

“I’m going to save $6,000 over the next year for a down payment on a new car. I’ll save $500 a month through working 5 extra hours per week and meal prepping lunches Monday through Friday.”

This goal is specific, measurable, attainable, relevant, and time sensitive. Most importantly, it’s transparent. This enables clearly visible progress that will help keep the entire rest of my budget on track.

 

3)    Budgets are not always about cutting back

An effective budget shouldn’t be holding you hostage -- it should liberate you to use your money how you choose. Think of it as a way of helping you prioritize and categorize your money choices. While you might decide to rein in on a spending area you’ll do so knowing it is only to serve something you’ve given higher priority.

The most efficient way to save is very rarely cutting the extra few bucks spent on coffee. Think about different ways to transform your major expenses, especially the ones in the 50% area of 50-25-25. Whether you switch to public transportation, shop generic, or get a roommate, these decisions will have the largest positive impact on your budget. Over the course of a year in New York City, that roommate could be worth over 3000 of your precious lattes.

 

4)    Ease into it

Start by making your budget ambitions yet attainable. It’s unlikely you will go from putting $0 into your savings account each month to $1,000. Even if you do, I doubt it will be fun or sustainable. A key to an effective budget is its longevity. Learn to love the empowerment you have over your money -- start slow and savor the wins.