Consider this: The median household income of Americans in 2019 was just over $68,000 according to the Census Bureau.
If starting a budget caused you to save even 1% more of your yearly income, that would be an average of about $56 a month of savings. When $56 is invested per month over your 40 year work life at a 6% rate of return (adjusted for inflation), you would suddenly have an extra $110,000 to use in retirement.
Just. From. Budgeting.
Do I have your attention? Sweet.
Last Friday, we made an example budget to show you how it’s done. Now, let’s go over 6 do’s and don’ts of budgeting that will help make your budget a success in 2021.
Tip 1: Do track purchases after each transaction
Every dollar of your income and expenses is important. So each transaction you make should be recorded.
That’s why I like using a budgeting app so much. If Bailey or I get out of the grocery store, we can immediately pull out our phones and input the chocolate milk purchase (or whatever you buy at the grocery store).
Now, you might be more of a sit-down-a-couple-times-a-month-and-track-expenses type of person. That’s fine. But if you want the fewest surprises possible, track each expense right after you’ve made it.
Then you won’t have to track a lot of expenses at once and realize you have no money left for the rest of the month!
Tip 2: Don’t go budgeting alone
If you’re married and you’re the numbers person, don’t do the budget without your spouse knowing what’s going on as well! You need to do this together. I’m not saying you have to make the budget together, just that you should agree on it together.
Then everyone get’s a say in where the money is going and there will be fewer surprises along the way.
If you’re single, ask a friend or family member to keep you accountable. It’s not like you have to ask them to go through your bank statements every month to ensure you aren’t spending too much money on pillows. Just let them know what your financial goals are as well as tough areas of budgeting and ask them to check up with you occasionally to see how it’s going.
It might save you from that frappuccino next time you’re out. Though, frappuccino’s are incredibly delicious.
Tip 3: Do stick to your budget
This is obviously important because knowledge won’t in and of itself get you to a dignified retirement!
You have to act. If you budget $100 for restaurants every month but spend $200, that budget does you no good. You gotta stick to it.
Tip 4: Don’t beat yourself up for failing
You will fail. Use it to learn, though. You’re going to need somewhere around 60-90 days to get really comfortable with budgeting and be able to predict it accurately.
Until then, you’ve gotta give yourself some grace. And after that, you have to realize your budget will change because life is unpredictable. That’s why you need an emergency fund!
Tip 5: Do make your budget before the first of the month every month
This is going to make it just that much easier for you to be consistent and form a habit. If you don’t create your February budget before February 1, it makes it a lot harder to track every expense. Then you fall behind.
I’ve done it before and catching up is never fun.
Tip 6: Don’t give up on it
Keep it up and be persistent! A budget is so much easier to do after you’ve gotten in a habit. Remember, 60-90 days of budgeting is going to really help you form that habit!
One more thing
And those are my tips!
I want budgeting to be as easy for you as possible. If even one of these works for you, that a success in my book.
Also, can we go back for a second and think about how serious $110k is if you started to budget? As one of my favorite YouTubers, Robuilt, would say, “That’s the equivalent of 15,714 chipotle burritos!” We won’t even talk about how much chocolate milk that is.
And that’s only from an extra 1% savings per month. That’s a low estimate in my opinion. If we jump it up to 2% saved and invested over a 40 year period, you’re looking at closer to a quarter of a million dollars.
Wild!
Did I miss any do’s or don’ts of budgeting? I want to hear from you in the comments below!
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