For some, they have never had complete control over their own monetary habits. The idea of devising a method to properly manage money now, let alone 10 years down the road, can be daunting. But managing money doesn’t have to be difficult, as long as you have a plan for being financially secure. The first step in becoming financially secure is to create a budget.
How do I start my budget?
To create a monthly budget, first find out how much you are spending. Your monthly expenses may include any combination of the following: housing (rent, mortgage payment, etc.), loans (student loans, auto loans, etc.), insurance payments (homeowners, car, and health), utilities (water, energy, TV/internet), and other expenses (transportation, groceries, dining out, personal expenses, investments, savings, etc.).
There are many online tools that can help with creating a budget and tracking where your money is going. Central bank offers customers a free online budgeting tool, Money Manager, to help you accurately and efficiently track your spending.
Next, compare your monthly spending to your monthly income. If your monthly expenses total less than your income, you have a surplus. If and when you get to a point where you have a surplus, adding funds to your savings or paying off existing loan balances are a great place to start. If your expenses are greater than income, you have a deficit. If you find yourself dealing with a deficit, or even would like increase the size of a surplus, you need to either increase your level of income (which can be difficult) or decrease spending, which can be easier depending on how you spend your money.
How do I reduce my monthly spending?
With fixed monthly expenses like housing, loans, and insurance difficult to decrease, you should consider cutting costs in other areas, such as utilities, food and drink, and personal expenses.
One way to cut down in this area is to focus on food and drink, as well as dining out in general. By taking the time to purchase groceries and prepare meals for yourself, you can save on expenses and calories. Eating take out or going to a restaurant is easier, and there's no prep or cleanup time, but these luxuries come at a price especially as restaurant prices increase. You can also prepare large quantities of food at once and save the leftovers to eat throughout the week.
Utilities can be another way to reduce your monthly costs: Keeping lights on, constantly running the furnace or air conditioner, and excessive water usage are all ways you can drive your monthly utility costs through the roof. Being mindful of water usage, dialing back the heat or AC, and remembering to turn off lights and other electronics may bring your utility payments down.
I’ve managed to trim my budget; what should I do with the surplus?
When you've found a budget that satisfies your needs with some money left over, how you spend that surplus is up to you! You can treat yourself to a night out on the town, or maybe use the money to freshen up your wardrobe, as long as you don't spend more than the budget.
However, if your budget doesn't already include a savings plan, you may want to consider adding savings as one of your expenses. As a general rule of thumb, you should allocate 15 to 20 percent of your paycheck to your retirement or future savings. Regardless of if you have no savings or over $5,000, it is never too late, or too early, to start saving.