Setting up electronic banking transactions and a weekly cash envelope help you stay on budget.
You know that you need to set up a budget, but sticking with it can seem daunting. The temptation to stray can be powerful, which is why some people find it hard to even create a personal budget. Here are five tips to help you avoid these mistakes and ensure that you stay on plan.
1. Set up automated, electronic deposits and withdrawals. Let computers do some of your work. Have your paycheck deposited directly into your bank account. Electronically set aside a certain percentage of your income or a set dollar amount every pay cycle or month to go into savings or some type of investment plan.
2. Use a weekly cash envelope. With a weekly cash envelope, you withdraw a certain amount of cash at the beginning of each week. That amount, which you set according to your budget, will last one week for discretionary spending (such as eating out or a new shirt, and in some cases, gas). Once you have used up all of the cash, that?s it for your discretionary spending for the week. Do not turn to credit cards. Hide them in difficult-to-reach places or destroy them if you need to.
3. Pay off debt in one of two ways. In the first way, you pay off more debt by focusing extra money on the loan with the highest interest rates. In the second way, which may be more psychologically satisfying, you pay off the smallest amounts of debt first regardless of interest rates.
4. Track your expenses?even if you monitored them thoroughly in the run-up to preparing your budget. Tracking can be a hassle, but the extra effort does help you stick to your budget. It provides in-your-face reminders of where your money is going and the commitment you have made to wise financial management.
5. Make lists for shopping trips. Lists help you avoid impulse purchases and allow you to better plan your spending.