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Developing (and Sticking to) a Realistic Monthly Budget

Do you have trouble keeping track of your monthly spending? You’re not alone. In fact, two-thirds of Americans don’t know how much they really spent last month.1 And while developing a personalized budget is important, having the self-discipline to stick to the plan is crucial to achieving long-term savings success.

Fortunately, there are plenty of strategies to help you understand your overall financial picture, identify realistic goals, and find ways to improve your spending and saving habits.

Identify Realistic Goals

Begin by getting a thorough understanding of your current financial footing, including how much debt you have along with all of your sources of income.

Next, write down both short- and long-term savings goals. Are you saving for a down payment on a house? What about finally paying off your student loans? Maybe you’re just looking to spend less at restaurants each month. Either way, identifying specific goals will help keep you accountable in the long run.

Then, decide on an appropriate dollar amount to budget for each category. If you’re not sure where to start, review your past three credit and debit card statements and add up how much you spent in major areas like groceries, restaurants, and shopping. Try trimming down each amount by 25% or to a certain dollar amount, and after the first month is over, evaluate whether you’ve saved as much as you’d like and adjust accordingly.

Budget Time for Your Budget

Sticking to a monthly budget not only requires the willpower to save but also the effort to constantly track your expenses. In the beginning, aim to sit down for a few minutes every week to review all of your accounts and track your spending.

Shopping trips to superstores like Target or Wal-Mart can be especially misleading on your credit card statements, since you can buy everything from groceries to clothing to home furnishings. Save your receipts and make sure you split up these purchases and assign them to your budget categories accordingly.

Stash Your Cash

Have a part-time job that pays you in cash? Chances are you likely take a little spending money off the top right away. Ask your employer if you can adjust the way you’re paid to instead receive a check or direct deposit. If not, make it a strict habit to drive straight to the ATM when you leave that job on payday. It’s a lot easier to save when there’s no cash physically in your wallet.

Be Mindful of Payment Apps

Apps like Venmo and PayPal have given us greater financial convenience in so many ways, but it’s easy to lose sight of how much we’re spending. How many times do you review your statements at the end of a month and realize that you’ve spent $150 extra at restaurants this month than you really should have?

With so many goods and services connected directly to apps on our cell phones, it’s so easy to jump in an Uber or pay for your morning coffee without ever realizing how much you’re spending. The bottom line: when paying digitally, be cognizant of your spending.

Double Down

Do you ever pass up an invite to happy hour? If not, get your self-control in check by “fining” yourself. Add up every $1 you spend over your monthly budget and transfer the same amount into your savings account. Maybe next time, you’ll decide to drink a glass of wine at home rather than a $30 bar tab, plus another $30 self-inflicted savings penalty.

Stay Motivated

Just because you exceed your monthly budget in the first two weeks doesn’t mean the rest of the month should go to waste. Small changes to your everyday routine will still go a long way toward accumulating extra cash, even if you have a few setbacks along the way. There will always be unplanned expenses and unavoidable impulse purchases but eventually, keeping a careful eye on your budget will become a habit and you’ll be able to cover any surprises with leftover cash from the prior month’s successful savings.

Make Saving Automatic

Reducing your spending is just a first step. Scheduling an automatic transfer from your checking to savings or investment account on payday is one of the best ways to “pay yourself first,” stick to a budget and build an emergency fund. Jemma Financial can help you get started.

1. “Survey: 65% of Americans Have No Idea How Much They Spent Last Month,”, 5/29/20.

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