Budgeting is easier said than done. Whether you are trying to save money for a big purchase or just get a better grasp of expense management, there are measures you can take to help manage your spending and take control of your finances. Here are some tips to help you get started.
1. Improve your financial literacy
Regardless of your financial situation, financial literacy is the foundation of successful budgeting and money management. At every life stage, there are measures you can take to continue sharpening your financial tools, which will help you stay within your budget.
As adults take on more financial responsibilities, expense management grows increasingly important and complex. Learning how to build a financial foundation is a key first step in managing a growing budget. When deciding what’s a “nice-to-have” and what’s a “need-to-have,” it’s important to get in the habit of researching the pros and cons of your major financial decisions.
2. Learn to manage your emotions along with your money
It’s no secret that money and emotion go hand in hand. Money can impact our stress levels, mental health and personal relationships. In fact, more than half (53%) of Americans feel anxious thinking about their personal finances, according to the National Financial Capability Study‡ conducted by the FINRA Investor Education Foundation. However, there are steps you can take to better separate your emotions from your money, which in turn can help you become more confident and less stressed about your financial future.
Checking in and updating your goals is an important part of managing your money and mental health. Whether you are already on a solid financial path or are just beginning, it is always a good idea to meet with your banker or find a trusted financial advisor. A banker can help keep you on the right track, whether that is managing your debt, balancing your budget, saving up for a big purchase or getting ready for retirement. They can help review your budget and financial roadmap and update as necessary so that your emotions are more manageable when significant life events happen.
3. Analyze ways to trim expenses
The way we spend money shifted in recent months, as many retail businesses closed and the majority of us no longer commuting to work. But now that economies and communities have reopened, you have a chance to evaluate your previous spending and identify areas where you could limit spending moving forward to maximize your budget. In fact, according to research commissioned by Ladder‡, Americans spend nearly $1,500 per month on nonessential items—including almost $750 on dinners out at a restaurant, drinks with friends, takeout or delivery, and purchasing lunches.
For some, the shutdown may have contributed to increased savings as many businesses that fall in these major nonessential spending categories were either closed or operating at a limited capacity. In that case, now is the ideal time to explore the best options to save or invest your money.
4. Always be prepared for the unknown
While budgeting is vital for managing money on a week-to-week or month-to-month basis, you should always plan ahead. When managing your budget, make sure you are consistently saving for both pre-planned and unexpected large expenses.
By keeping track of your spending, you can sort costs into different categories, which will help you find areas that you can spend less and redirect those dollars into savings. For example, if food and meal deliveries are costing $100 every month, cutting them out can help build funds faster.
While it can be hard to withhold money from your budget for a possible future emergency, make these savings a mandatory part of your expense management. It can be very tempting to spend money on something fun or interesting instead of depositing it in an emergency fund that you may or may not need. Without that reserved cash, however, you won’t have extra funds to turn to during an emergency.
5. Conduct a financial review
A financial review is a simple way for you to better understand the current state of your finances and it can help you develop valuable insight into changes or adjustments that might be needed so you can meet your goals. A key benefit of a financial review is transparency. When you regularly check in on your income, debts, investments and other financial obligations, you have a clearer picture of where you stand and can better implement expense management.
Tracking all of your income, holdings and recurring debt is the foundation of a financial review. To complete a review, tally up all of your expenses by going through all of your financial statements—including your banking, retirement, student loan, credit card and mortgage statements. By doing so, you can build a budget that reveals where you can and should reduce your spending; Similarly, you can prioritize your expenses.
While it is ideal to complete a financial review annually, it can be a time-consuming process. If you don’t feel comfortable completing such a comprehensive review on your own, schedule a meeting with your financial professional to work through your budget.
By taking stock of your income and expenses, you will be able to create and stick to a budget that will help you manage and control your money.
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