If you’re anything like me, keeping a monthly budget can be really difficult. I start off the month well-intentioned but end up completely off-track once expenses and social events start rolling in. Plus, If I’m honest, I like to spend money far more than I enjoy saving it. Both of these tendencies combine to create a sizable and intimidating issue for me when it comes to covering my monthly expenses and meeting my financial goals.
Over the years my income has steadily increased but my debt and savings either stay the same or go in the wrong direction. And that’s not entirely due to my emotional habits around spending. It also has a lot to do with being confused about how EXACTLY do I tackle this monster of a problem and it what order? How do I get out of debt? Do I save my nine month emergency fund before I start paying it off? Or should I put 10% of my income toward both at the same time? And if so, how do I live without 20% of my income when I’m having a hard time meeting my expenses with 100%? Plus, what EXACTLY constitutes an “emergency” and should I continue to save and pay off my debt when I’m in an “emergency” scenario?
To help navigate through all of the advice scattered out there in books and personal finance websites, I have compiled some quick and really simple budgeting tips from Dave Ramsey’s Guide to Budgeting. These are all low-tech and low-fluff to help focus on the KEY strategies to get in better control of personal finances without getting overwhelmed or confused.
Quick Tip #1: Follow DAVE Ramsey’s 7 Baby Steps
Instead of making a crazy, technical budget and thinking off all the financial decisions that need to be handled, Dave suggests starting with these 7 Baby Steps. Start at 1 and then work your way down the list:
Quick Tip #2: Start Early
Dave recommends making your budget a few days BEFORE the month starts, even if you haven’t been paid yet or aren’t sure what your income will be. Need a place to create a FREE online budget? Click here.
Quick Tip #3: Write it Down
Whenever you make any purchases make sure you write it down and add it to your budget that day. Don’t rely on memory, account balances, or weekly receipt round-ups.
Quick Tip #4: Cash Flow Emergencies
If an emergency comes up try to cash flow it before tapping into your emergency fund. Ramsey says:
“If you can cut up to 10% off items in your budget to pay for something that comes up, then cash flow it. Otherwise, go for the savings.”
For example: If you need $200 for an emergency dentist appointment, go line-by-line through your budget [groceries, entertainment, gas, clothing, etc.] to see where and if you can take 10% of what you have already budgeted to cover the expense. If you can’t cover it all without using 10% or less, cover what you can from the cash flow and then use your emergency fund to cover the rest.
Quick Tip #5: Use Envelopes
Create envelopes for each line item on your budget and place the exact dollar amount in cash in each envelope. If you run out of money before the end of the month then do without. If you have money left over, reward yourself with the money or add it to your emergency fund or Baby Steps.
Quick Tip #6: Set Priorities with Irregular Income
If you get paid off commission or are a small business owner and aren’t sure how much money you will have coming in from month-to-month, follow these three steps:
- List all of your monthly expenses in order of priority. Start with the Four Walls: Food, Shelter & Utilities, Clothing (within reason), and Transportation. Those should be numbered 1-4. Number your remaining expenses in order of their priority starting with number 5.
- Beside each item write how much you need to spend in that area (think bottom line and not ideally).
- “When you get paid, start at the top of the list and work your way down.” If you get a check for $200, ALL of that money should go to the first item on your list. Roll over any leftovers to the next category until you have used all of your income or run out of expenses.
If you run out of money, draw a line and don’t spend any money on items below that line until you get more income.If you do, be sure to pick up exactly where you left off. If you can’t make it through your monthly expenses, make necessary changes when planning next month’s budget. If you do make it all the way down your list with money to spare, use it to work your way down the 7 Baby Steps.
Quick Tip #7: Use the Hill and Valley Approach
If you find yourself having more income than you planned on, save it for another month when you might have less. Consider this when you get work bonuses, new clients or contracts, or cash gifts. This “extra” income can also be used to work your way through the Baby Steps or cover future monthly expenses.
What tips, tools, or tricks do you use to stay on top of your finances?