A balanced budget creates a future most people only dream about
When we talk about how to balance your budget, that means your expenses are more than the income you are earning each month and if you are ever going to stop the financial stress you feel, this has to be fixed.
You may have noticed that your monthly expenses are much higher than you thought while compiling your list in the previous chapter.
Were you spending more money every month than you had anticipated? If this is the case, you are in the same reality as most people because it is the common reaction when people make this list for the first time.
What do you do if, after identifying your typical monthly expenditures, you find that there isn’t enough money to go around?
The answer is simple: cut back.
However, while the answer may be simple actually making this happen can be much more difficult.
At this point, you must determine which bills or expenditures can be done without. Identify areas where spending can be reduced.
If you’re not sure whether something is truly necessary, it probably isn’t.
It’s easy to feel the urge to acquire things we don’t need and actually don’t make a difference in our life (although we talk ourselves into believing it will at the time of purchase.)
The following chapter will cover the importance of getting rid of some of your financial responsibilities and cutting back on others.
It also provides useful tips on getting rid of things you don’t need so you can balance your budget.
Get rid of unnecessary expenses
In today’s culture, most people spend money on items they don’t need in order to fit in.
For example, you’ll notice a young person with an iPhone or another smartphone almost everywhere you look. Children who do not possess one are often branded as outcasts by their classmates.
Although it may appear to be a necessary expenditure to purchase an iPhone, it isn’t.
Now that you’ve compiled a list of your monthly expenses and income, it’s time to compare the two lists.
If your true financial goal is to get off the money roller coaster, you have to make sure you’re bringing in more cash than you’re spending.
It’s the only way to balance your budget.
Maybe your monthly expenditures is not more than your income.
Are you able to save enough each month so you have money available for an emergency?
You need wiggle room in your budget in case something goes wrong in life, as unexpected events happen. If you spend more each month than you earn, you’re in trouble and will surely feel it in numerous ways.
It’s like being trapped in a black hole with no means of escape.
The hole’s gravitational pull keeps drawing you in, pulling you deeper and deeper until you can’t see light or manage your debts.
If you want to stick to a budget and achieve financial success for yourself, it is necessary to give up certain activities, do without specific items you may want, and make the changes to balance your budget for the rewards that will come from making these tough decisions.
Most people who have made it rich and were not born into a wealthy family will tell you that they had to make many concessions.
You must figure out what is necessary in your life versus the things you are spending money on that are not actually necessities.
It’s crucial to distinguish between the two because it will aid you in making difficult financial decisions down the road.
Following are some examples of items you may not want to live without, but need to cut so you can balance your budget:
You must consider if this is truly a necessity in your life. What is the monthly cost of your service, and how much time do you spend watching it?
How much money is on your expenditures list for activities that cost money?
Going out to clubs and expensive restaurants will only provide you with an empty wallet and overpriced cuisine that is frequently overrated if this is a common occurrence.
If there is money available in your budget for going out, stick to establishments that are reasonably priced unless the occasion is super special and happens infrequently.
Try fun activities such as bowling or go to a pool hall and play a few games.
No matter what your hobbies are, there should be inexpensive activities around them you and your family or friends will enjoy just as much as when you spend a large amount of money on an evening out.
Eat at home more
Many individuals are unaware of how costly it is to dine out on a regular basis, whether it is running through a fast-food drive-through or splurging in a nice meal at a full-service restaurant.
A few dollars per meal may not appear to be much at the time of your purchase, but it adds up quickly over time.
You can make the same dishes you get in restaurants at home.
The same meal you can get from a restaurant may be made at home for a fraction of the cost, which is good for your health and your budget.
Cancel unnecessary subscriptions
Many people start a magazine subscription or newspaper subscription with the idea that they are going to read it daily and take full advantage of the convenience of the subscription.
For some folks, this may be true, but for many others, the subscription is wasted and lays on the sofa table taking up unnecessary space.
Magazines may end up gathering dust in some people’s homes; others may still have newspapers from last year.
When you think about it, spending money on something that simply sits around and collects dust seems rather silly.
The money spent on those subscriptions might be better utilized in other ways.
However, when working hard to balance your budget, is it truly a necessity to read a subscription-based magazine or newspaper?
Cancel unnecessary memberships
Similar to a subscription, you may be subscribed to weekly, monthly, or yearly memberships.
You need to determine whether the memberships you pay for are important and beneficial to your budget.
For example, if you pay for a membership to Sam’s Club, Costco, a local co-op, etc., but haven’t been there in a while, it’s probably time to cancel the membership and save your hard-earned money.
Another example is if you belong to a club, such as a car club, fitness club, etc.
This may be the time to give up the membership or put it on hold if that is a possibility until you can afford the fees more comfortably. These are only a few examples of what you might have to cut back on or eliminate entirely in order to balance your budget.
As you can see, the process of eliminating expenses may not be simple, but it will be beneficial to your life in the long run and worth the sacrifice.
Keep in mind it is vital to discover activities to enjoy yourself while still sticking to a budget. A budget is not meant to make you feel miserable, although it can take time to transition as you stop doing things you once allowed yourself to do.
You have to find a way to replace the activities that create financial stress with activities that cost less or that are free.
Without rewards, your motivation to stick to your budget will be difficult.
In the long run, if everything you enjoy is removed from your life, you likely will give up and never experience the financial freedom you desire.
How to follow a budget plan
Following a budget plan is not as difficult as it may appear if the appropriate tools are used and a positive attitude is used from the start.
There are several genuine and tested strategies for creating and maintaining a budget plan that may help you.
The following suggestions are included to help you stay on track with the hard work you put in to balance your budget:
- Keep a journal
- This should be done on a regular basis for at least three months. Once the incoming and outgoing items have been itemized thoroughly, follow-up actions can be added to the budget plan
- Track income and necessary expenditures, such as
- insurance premiums
- school fees
- other important expenses
- These should ideally be recorded as yearly costs and then divided and added into the monthly budget
This will assist you in gaining a full understanding of your yearly obligations without forgetting to allow room for them monthly, even though they are not paid out of your bank account monthly.
- Track tiny pleasures like a pricey meal or personal treat
- This will encourage you to stay on track with the amount you budgeted for luxury items since it is easy to over-indulge too frequently
Additional tips to balance a budget for a family
People frequently believe that household, or family, budgets are limited to current costs incurred within a month that are related to the household.
A thorough family budget, on the other hand, should include all incoming and outgoing funds for the family over the course of a year.
The following are some of the areas that aren’t typically addressed but should be when it comes to preparing a budget for your family:
- Income from all contributing family members
- Payments of monthly obligations for all family members
- Payments made quarterly, yearly, etc., must be averaged out and included in the monthly household budget
- Individuals can create separate allotments for non-essential expenditures, such as eating out or buying gifts.
- These should be separated from the primary household budget and included in a subsequent section labeled “Discretionary”
- To maintain some degree of discipline and control over the family finances, savings must be included, especially if they are part of a commitment to achieve something
- Examples would be retirement funds, emergency cash, educational funds, etc., and any other long-term financial objectives that may change in commitment amount for payment
- Existing debt
You’re making great progress!
Gathering your income sources, making a list of all your bills and money expenditures, then balancing your budget can be an overwhelming process, but you did it!
With the hardest part behind you, now it is time to start following your spending plan and monitor it to stay on track.
Let’s dive in!
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