Have you ever daydreamed about having more money than you knew what to do with? Imagine wanting something—stylish new shoes, a sports car, a sprawling mansion, an island, anything—and buying it without pause thanks to your bottomless, overflowing coffers. How wonderful would that be?
Unfortunately, none of us has an inexhaustible supply of money. Income is finite in the real world, which makes budgeting an imperative element of household finance.
A budget, simply put, is an estimate of income and expenses for a set period of time. If you’re like most people who get paid once or twice a month and pay their bills on a monthly basis, you should be budgeting your household finances each month.
The problem is that many people see budgeting as a nuisance, if not a nightmare. In fact, a recent poll shows that just 32 percent of Americans put together a monthly household budget. The flip side of that statistic: More than two thirds of adults in the U.S. aren’t keeping detailed track of how, where or when they’re spending their money.
However, budgeting doesn’t need to be a necessary evil, nor should it be. It’s a fantastic tool for controlling what you spend, developing discipline and avoiding unnecessary stress. It can help you eliminate debt, reduce impulse buying, save money and plan for the future.
The following are a few tips on making—and sticking to—a budget:
Achieve balance, shoot for surplus
In a balanced budget, revenue and expenses are equal—in other words, you spend what you earn. If you spend more than you make, you have a deficit budget; if you spend less than you earn, you have a surplus budget.
If your monthly budgeting reveals a deficit, make balancing your budget your first goal: Cut up credit cards, use cash, pay off debts, and cut wasteful spending anywhere you can. When you’ve balanced your budget, take time to celebrate the win. After all, you’ve just accomplished something that many individuals, businesses and even governments have yet to do.
If your current budget is balanced, make surplus your goal. Look for additional ways to cut expenses and increase your income so you can start saving money.
Do you already have a surplus budget? Good for you. Your goal should be to tip the scales even further in your favor. The more you save, the healthier your budget is and the more secure your future will be.
When you’ve balanced your budget, take time to celebrate the win. After all, you’ve just accomplished something that many individuals, businesses and even governments have yet to do.
Begin by simply making a list of monthly expenses—both essentials and extras—and a separate list of your income-generating activities—full-time job or residual Melaleuca income. This will give you a picture of where your money is coming from and where it’s going every month.
Also, save your receipts and balance your checkbook regularly. Set aside time at least once a week to update your ledger. Most people who are caught off guard by overdraft fees fail to record their debits and credits in a timely manner. If you’re not a paper-and-pen person, try using personal finance software. A lot of programs can be accessed on the go via your phone and include built-in budgeting tools to help you analyze your spending.
Lighten your load and be accountable for your budget by sharing it with others. Couples who keep finances secret from each other not only run the risk of a relationship of mistrust, they also miss out on the benefits of teamwork. When both of you are on the same page, you can set goals and celebrate wins together, offer each other advice and encouragement, and keep an eye out for potential spending traps.
If you’re single, turn to others in your household and keep them apprised of your budget. While they may not be accountants, your parents, siblings and even children can serve as familial financial consultants because they care about you and likely share your financial goals.
Cut bad habits
If there’s a deficit in your budget, you have two options for achieving balance or surplus: increase your income or reduce expenses.
Thankfully, building a Melaleuca business is within your direct control, and it’s the best way to increase your residual income.
Cost cutting is also within your immediate power, and quitting a bad habit or two is an excellent way to quickly free up cash. Are you watching too much TV? Cancel your cable or satellite service. Are you eating out too much? Commit to making all your meals at home.
Alcohol and tobacco are not only bad for your body, they’re murder on your wallet. If you quit smoking and drinking, your physical health won’t be the only beneficiary. You’ll have more money for other expenses, you’ll probably qualify for lower insurance premiums and you’ll likely avoid health care expenses down the road.
One way to help you stay on budget is to use cash for the entire month. After you’ve paid your fixed expenses and other bills, take the remaining cash and divide it into as many categories as you need for the month—$200 for groceries, $150 for gas, $75 for restaurants, for example. Once the cash is gone, it’s gone. You’ll find it’s a lot easier to say “no” to a $100 blouse when it will drain the rest of your month’s cash than it is when you can just swipe a card for it.
A significant contributor to overspending is the card—both credit and debit. In fact, when shopping with plastic, consumers routinely spend up to 50 percent more on impulse purchases.
Revisit and revise
Just because a budget is set for one month doesn’t mean that things won’t change. A lost job, a new job, new insurance premiums or the arrival of a child all require adjustments to your finances.
Be flexible as you update your budget regularly. If you go over budget one month, don’t beat yourself up. Take time to reevaluate your plan and get familiar with the system. Budgeting can be a challenge, but the longer you stick with it, the easier it will become.
Whether you make $30,000 or $300,000 a year, knowing your financial numbers can save you a lot of heartache. The news is replete with stories of celebrities who earned tens of millions only to end up bankrupt due to their lack of financial discipline. The lesson is simple: Life is better on a budget, regardless of your income.