I live in one of the most expensive cities in the United States and I understand that budgeting can be tough, especially as I do not want to miss out on all the delicious food and fun events the city has to offer… not to mention all the weekend trips and flights that call my name. The American Psychological Association studies show that stress about money and finances appear to have a large impact on Americans lives, especially for parents and younger adults who will tell you that money stress plays a large part in their lives. 1 in 5 Americans surveyed said that they’ve thought about skipping or did skip going to the doctor when they needed health care because of financial concerns. While I’m not a financial expert, I’ve learned to balance my home, priorities, needs & desires and I’ve learned a thing or two about organizing financial well-being. Here are my 4 steps:
- Create a Budget
The first step to organizing your financial well-being is to create a budget that works for you. There are many ways to create a budget, you can find 10 online budget tools here or various example budgets online to get you started. If you’d like to start from scratch, be sure to include all expenses, those like rent, medical bills, or student loans…down to drinks with friends or clothes shopping. I’ve taken my credit card bills for the previous 2 months and highlighted categories of spending to see where my money is going. While you are creating your budget, it is important to know where you spend your money. I know some people who take their income, subtract their bills and then divide the remaining amount by the number of days until their next pay check. That is what they allow themselves to spend each day. Anything left goes straight to savings.
After expenses, my main advice is to think about what is important to you and prioritize it in your budget. That is where your money should go. For me, travel, food, and health is important. I spend less on drinks out, concerts, lunches – and save more for plane tickets, fun restaurants and organic ingredients for cooking. Some people ask me, “How can you afford to travel so much?” It is because I prioritize it – I make my lunch, I don’t buy coffee, and think about everything I spend my money on.
- Track Your Spending & Stick to Your Budget
After creating a budget – stick to it, keep yourself honest by tracking your spending. You may be surprised to see how much money you are spending on monthly subscriptions, groceries, or how your $2 daily coffee at Starbucks adds up over the week, the month. $10 for lunch in the financial district of San Francisco is pretty typical. $10 doesn’t feel like a lot of money, however if you buy lunch 5 days a week – that’s $50, or $200 a month. There are many ways to track:
- Excel, you can find free templates here or here
- Budget Tracking Apps, like my favorite, Mint or one from this list of the Best of 2015
- Through your online banking account
- Make Savings a Priority
What will help you get to the doctor when you have a health concern or help you when you’ve had an unexpected expense? What will help you stress less about the future and feel comfortable as you retire? The answer is Savings. Here are a few tips I’ve pulled together to help build your savings:
- After paying your bills, move money into a savings account right away, before you can spend it or before you even “see” it in your account. Even $10 a paycheck will add up over time.
- Take advantage of programs like “keep the change” at your bank, that automatically round up to the nearest dollar when you purchase items with your debit card, and deposit the change into your savings account.
- Set savings goals. Studies show that those who create and write down their goals are much more likely to accomplish them.
- If your company has a 401(k) match program, always contribute the largest percentage that they will match. It’s free money! Review your 401(k) match yourself annually, and consider contributing more any time you get a raise.
- Create a few savings accounts: a rainy day savings (experts suggest having enough money in this account to keep you going without income for 3-6 months) and a shorter term savings, for things like travel plans, Christmas gifts, deposits on a house, or apartment leases. You can also create a fund for emergency savings for the expenses you may incur if you were to go to the emergency room or when something breaks down, like your car. It may feel overwhelming, but you have to start somewhere! Can you afford $10 a pay check into each account? It’s a start!
- Look into ways to refinance your loans.
- Look into investing options.
- Become Budget Conscious
After setting your budget, tracking and making savings a priority – make spending money a conscious act. There are many ways to be conscious of your spending, either by saving (shopping on sale, making coffee at home), researching highest quality for the lowest price, or just reviewing your budget goals every month. Here are a few tips for saving and being budget conscious:
- Pack your lunch, leftovers from dinner, wraps, salads – take 5 minutes to prepare lunch for the next day. (Also allows you to be more health conscious by planning your meals!)
- Buy birthday and holiday gifts throughout the year. Make your own cards or buy in bulk.
- Wait for sales before purchasing anything, they happen so often in the US!
- Be conscious of the food you’ve purchased, don’t waste it by letting it go bad, that’s also money thrown away.
- Track every expense, so you do not spend more than you have – and think about bigger purchases.
- Review your energy bill – turn off lights when you leave the room and take a look at the thermostat.
- Make purchases on a credit card that gives your points and rewards for every dollar you spend.
- Review your spending every 6 months or so to see if you are overspending in any area.
- Take a look at these two money saving lists from Pop Sugar or The Simple Dollar.
There are a lot of words in this post, a lot of ways to save and a lot of ways to create your budget. If nothing else, the two things I want you to take away in being organized with your financial well-being is to be conscious of your spending and prioritize your goals – don’t “waste” money on things that aren’t important to you. What are your biggest budget struggles? What are you saving for?