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Sticking to a Budget

When it comes to budgets, the ones that work are the ones you can stick to. And sometimes that means, simple is best.

Tips for Simple Budgeting

  1. Get a small notebook and dedicate each page to the following elements of your budget:
    • Take home pay
    • Monthly expenses
    • Spending plan
  2. Determine your take home pay for one month including dates paid.
     
  3. Write down all your monthly expenses—fixed, variable, and periodic.
    • Fixed: stays the same each month, e.g., mortgage or rent payment.
    • Variable: monthly purchases that differ in amount, e.g., groceries and gas.
    • Periodic: expected and unexpected expenses that are not due monthly, e.g., taxes and home repairs.
  4. Develop a payment and spending plan.
    • Arrange the due dates of your monthly bills from first to last.
    • Calculate weekly spending needs—groceries, gas, and variable expenses.
    • Determine your pay dates monthly.
    • Don’t forget to pay yourself! Make contributing to your savings part of your plan.
    • Match bills and expenses to coincide with your income. Consider changing due dates if necessary.

It’s also helpful to schedule a specific time every week to monitor your spending to see whether or not you are sticking to your budget.

Staying on Track

Keeping track of information about your spending, saving, and borrowing will not only help you keep up with your plan, but maintain your peace of mind as well. Here are tips to help you stay the course.

Carve out a “money space”

Try to find a quiet place where you can get away from other day-to-day distractions and just focus on finances. It can be as simple as a desk in the family room or a corner of your bedroom. Stock it with supplies such as pens, paper, stapler, filing containers or a filing cabinet, and a box for incoming mail.

Keep records organized

Organizing and consolidating your records for each aspect of your personal finances - savings, investments, insurance, goals, loans, credit cards, medical, payments, etc. can make a big difference.

Manage your cash flow

Make sure you keep track of odd pay cycles, multiple due dates, and automatic deductions, to see the timing of your income and expenses.

Look hard at day-to-day expenses

Day-to-day spending is one of the most overlooked areas when it comes to personal finances. Items that you purchase regularly for only a few dollars can really add up over time. Consider that purchasing coffee every day from a coffee shop for $3.00 will add up to over $1,000 in one year!

Write it down

Simply take a notebook or piece of paper and make spaces for recording out-of-pocket expenses for each day of the week. At the end of one week, add up everything and see what the damage is. Knowing where you spend helps you know where you can save.

Use lists

Another way to gain control over your spending is through the effective use of lists. Shopping with a grocery list, in particular, is beneficial as there are so many opportunities for temptation and unplanned spending at a grocery store. Instead of creating a list for each trip to the grocery store, consider making an ongoing list of the items that you purchase on a regular basis.

Avoid Going Over Budget

The primary method to help ensure that we keep from accidentally overdrawing our account is “balancing.” Balancing means that we keep track of the money that goes in and out of our account and regularly compare the difference online or with our statement. Follow these simple steps to balance your account:

  1. Locate the balance shown online or on your statement.
  2. Look for withdrawals you made that do not appear online or on your statement.
    • Subtract these from the balance shown online or on your statement.
  3. Look for deposits you made that do not appear online or on your statement.
    • Add these to the previous amount calculated.
    • Remember! Funds availability may vary by the type of check or how you deposit it.
  4. Compare to see where there might be differences.
  5. Look for items that might not have been recorded that may account for the difference.

Example:

Social Security Seminars Schedule
Step Detail Balance
1 Account balance online/statement $750.00
2 Subtract amount of withdrawals not appearing -$125.00
  Difference = $625.00
3 Add amount of deposits not appearing +$70.00
  Actual balance = $695.00
4 Balance in my records = $725.00
  Difference = $30.00
5 Items not recorded:
Debit card payment pending =
 
$30.00

Safeguards

Additionally, it’s important to consider these helpful safeguards to help avoid overdrafts and surprise fees:

Use direct deposit

You’ll receive your money faster and save time by not needing to visit your bank to make deposits. This helps you have money in your account when you need it to pay bills.

Cushion

Maintain a certain amount of money in your account as a cushion—$100, $200, etc.—so your account doesn’t get close to $0.

Savings transfer

Keep a cushion in your savings account as a backup to that first cushion. You can transfer money into your checking account if needed, however limits may apply when transferring money electronically. According to Federal Reserve Regulation D, you can make up to six electronic withdrawals and or transfers from/to your savings account per month.

Online and mobile banking

Check your balance anytime, anywhere. Don’t forget about recent transactions that haven't appeared yet when determining what’s safe to spend. These are called pending transactions.

Alerts

Set up alerts on your accounts that notify you when your balance gets below a specific threshold. You can set up account alerts with ESL online banking or through text banking.

Overdraft services

Consider an overdraft protection service that allows you to link your account to a line of credit or savings account to help cover any overdrafts.

Additional Resources

Want more assistance in sticking to your budget? Check out the resources available through our partner, Consumer Credit Counseling Service of Rochester.