Whether you're getting married, having a baby, buying a home or starting a business, every adult could benefit from a budgeting refresher. Basic budgeting tips could be useful for 30-somethings — especially as life gets more and more complicated.
Now could be a critical time to save and invest in your financial future. However, it could be difficult to buckle down when life feels like a never-ending whirlwind of activity and commotion. A solid budget could allow you to meet those all-important savings goals, and let you enjoy life right now. Consider the following budgeting tips that could help you set up a spending plan that's realistic, easy to maintain and something you can stick to over time.
Know Where You Are & Where You Want to Be
Think of your budget as a system that will help you to put your money to work to achieve your goals. To budget effectively, it could be helpful to know what those goals are. Take a moment to list your long-term, mid-term and short-term goals. Then, make an assessment of your current financial situation.
How much have you already put away? What's your total monthly take-home pay — otherwise known as the cash that hits your checking account after taxes and withholdings? This is the money you can work with when putting together your monthly budget.
Start With Savings
Many people budget backward: They look at what they're spending, build their budget based on their expenses — and only save if they happen to have leftover cash at the end of the month. But you could tackle this differently by making your savings goals a priority.
Let's say you have the following financial goals:
- Buy your first home for $250,000 in six years.
- Save $100,000 for your child's education over the next 18 years.
- Invest money to grow a financial cushion of $1 million over the next 35 years.
These are just a few examples, and your goals may look radically different. There are three important things to consider: What are your goals? How much will they cost? And when do you want to accomplish them? From there, you could estimate a monthly savings amount for each goal.
Are you dreaming of being a home buyer? If you would like to save 20 percent within six years for a down payment on a home that costs $250,000, you'll need to save a total of $50,000 (or $8,334 per year). That would make your monthly savings goal $695, which could easily be included as a line item in your budget.
Are you hoping to send your child to their dream school someday? Saving $100,000 within 18 years would mean putting away $5,555 per year (or $463 per month). And hitting your golden years with $1 million in savings could require you to invest around $700 per month for the next 35 years, assuming a 6 percent return. Each of your savings goals could be a line item in your budget, which could help you focus your efforts — and make your dreams a reality.
Eliminate Unnecessary Expenses
Does your savings goal seem like a lot of money to put away every month? If it's not a realistic amount, you may need to adjust your goal or the time you have allotted to reach it. However, you could also try to make more room in your budget by eliminating expenses you don't really need.
Consider your flexible expenses and think about ways you could curb your spending. Do you eat at a restaurant multiple times a week? Do you spend too much on foodie items at the grocery store? Can you walk, take public transportation or choose to become a one-car household? Can you become more energy efficient when it comes to utilities? Can you move to a smaller home to save on your rent or mortgage costs?
Also, ask yourself the following questions for each transaction you make:
- Is this necessary? If so, can I do anything to reduce the cost?
- If it's not necessary, does it truly add value to my life? If not, can I live happily without it?
- If it's not necessary but does add value, are there cheaper alternatives that allow me to enjoy it without spending so much?
Anticipate Big Purchases
You can't cut every cost — but you can often plan for them. Some expenses are paid quarterly, annually (or are just flat-out unexpected). You could consider using the following budgeting tip, which could help ensure you'll have the cash on hand to take care of those costs.
List those one-time or sporadic expenses and divide them by 12. Even if you don't pay for the expense monthly, you could add that number to your monthly budget. For example, if your annual back-to-school shopping frenzy for the kids costs around $1,500, you could budget $125 per month for this spree. This process could help you automatically set money aside — within your checking account — every month. This could help ensure the cash will be in your account when you actually need to pay for the expense.
Easier said than done, right? Don't worry — you're not alone. Budgeting, even for an established adult, can be hard. Ultimately, the best budgeting tip may be this: Small steps often add up to big changes over time. You may not be able to take action on every last one of these tips, but you could consider simply starting where you are and doing what you can.