Financial planners insist that a budget is the key to wealth accumulation.
But saving for a predictable event such as retirement or a child's college education is only half the story. Importantly, many Americans fail to plan for unexpected events and emergencies, which can take a bite out of savings and significantly affect long-term security.1
Looking for ways to make your budget work harder? Try these tips.
Think of your budget as a plan to ensure you spend your money on what matters most to you, rather than a way to restrict spending.
How you would like to spend your money and how you actually spend it are two different things. In addition to accounting for fixed expenses such as mortgages or car payments, use a daily journal to track your cash expenditures. After several weeks, you’ll start to notice trends in your purchasing.
Handing over cash forces you to think about what you’re spending to a greater degree than swiping your plastic does. Once a month, withdraw money for variable expenses, such as lunches out. Having cash on hand may help you make your money last all month.
Do you really need that weekend vacation or new fishing pole? These impulse purchases impact your ability to meet your long-term goals.
If all your money is in one account, it’s easy to feel flush and to overspend. So set up sub-accounts for retirement, education, even vacation.
It takes teamwork to achieve financial goals. Ask advice, communicate with your spouse or partner, and get your kids on board with savings goals.
Successful budgets are works in progress. Don’t view occasional overspending as a failure, and remember to review your budget regularly.