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5 Tips for Establishing a Monthly Budget

If you’re looking for a credit union in Salem, Oregon, then no matter what services you’re interested in—home loans, auto loans, high-interest savings accounts—the first thing you’ll want to nail down is your monthly budget. This is the foundation for all future financial success. Here are our top five tips to establish a budget and stick with it.

1. Be Honest with Yourself

If you really want to stick to a monthly budget, you’re not going to find success by selecting an arbitrary dollar amount and deciding you won’t spend more than that. It’s unrealistic and you’ll have no way to hold yourself accountable.

What you need to do instead is be honest about your spending habits in each category and then make adjustments to meet your goals.

Goals are important because they are what will drive you to hold yourself accountable. It’s easy to go out one more night a week and meet up with a friend for a quick bite when that money isn’t allocated for something special like paying off a credit card, a trip to your dream destination, or a down payment for a car or house.

If you’re ready to make and stick to a budget, then you know that money doesn’t grow on trees and your life will never change for the better if you don’t evolve the way you’re spending and saving money. So, first, be honest with yourself about all of your finances.

Sit down and identify how much you owe on each credit card, how much you still owe on your student loans, where you’re spending too much, and where you need to allocate more money.

This exercise is not meant to place blame or shame. You just cannot move forward without knowing where you are today.

2. Identify Your Fixed & Variable Costs

A fixed cost is one that doesn’t change much month to month. Your rent, car payment, and insurance, for example, are fixed costs. No matter how much you want to pay less in rent, that’s just not possible unless you move. What are your fixed costs? Open an Excel worksheet and write each one down with the amount owed next to it.

Then continue growing your list of monthly expenses by adding in your variable costs. These are ones that can swing, sometimes a lot, others a little, from month to month. Either way, there’s wiggle room.

These items or categories include gas/transportation costs, vehicle maintenance, pet expenses, utilities, medical costs, groceries, and your entertainment budget. Get as granular as you like and assign an expected amount to each. And don’t forget to use your online statements from last month as a guide.

3. Know What You Can Expect to Save Each Month, If Anything

Once you’ve made your list of monthly expenses and noted how much you think each item on the list will cost, it’s time to reveal the grand total.

Now make a separate list of any incoming money. This includes your job, a side hustle, health reimbursement, and anything else you expect to help support you in this coming month.

Look at those two totals and subtract the difference. This number might be shocking as you realize how little you have left over at the end of the month.

And, most imperative, hopefully, your incoming total is higher than your outgoing total.

If you find yourself in the red, losing money each month, then instead of continually relying on credit cards or another source of credit that’s going to keep you in the hole, look over your expected budget and ask yourself where you can cut.

Here are a few popular ways to trip your budget:

  • Limit eating out
  • Buy store-brand groceries
  • Cut back on snacks, soda
  • Do your nails at home
  • Wash your own car
  • Take mass transit instead of your car

These budget-cutting tips are great anyway but will be essential if you’re losing money each month.

4. Make a Plan for Your Current & Future Self

Now that you’ve created a monthly budget, it’s time to take it for a test run. The first run will be one of the most important, as you’ll see how accurate you were in predicting spending in categories like groceries and eating out.

You may find that you spend much less on groceries and much more on lunches out during the week than you thought. That’s okay. The important part is what you do next.

Based on your current income and goals, can you afford to eat lunch out that much? If yes, then you don’t have to change anything, unless you want to reach your goals faster. If that’s the case, then you’ll have to weigh if lunch out is more important than your goals. Sometimes the answer will be yes. Other times, it’s better to bump up that grocery bill to lower your dining category spend.

No matter where you’re at or what goals you have, a budget helps you see where you are today and how to get to where you want to be.

Everyone’s budget is going to be different, and everyone’s priorities are different. While one person may never be willing to forgo a monthly pedicure, another will not miss a Star Wars movie when it’s released in theaters.

The more important goal is to find a balance between reaching for your future goals while experiencing moments of joy with your money today. It doesn’t have to be one or the other, as aggressive savings could lead you to relapse and ditch your budget altogether.

5. Identify Areas of Weakness & Ask for Help

Everyone has areas of weakness when it comes to budgeting, saving, and investing. Identify your weakness, make adjustments, and gain support from those who are here to help.

You might be committed to racking up credit card points, for example, only to find you overspend every few months and can’t pay the bill in full. Then you end up with interest fees, which might financially negate the points you tallied.

Or maybe you want to purchase a townhome but don’t know what the “right” amount to save for a down payment. So you’re only kind of sticking to your budget because your goal feels elusive instead of like a concrete dream you’re working toward.

Or maybe you just need to open a brand-new savings account where you slowly put away $20 per month that you won’t see and can’t be tempted to take from as a start on your path to a positive financial future.

No matter where you live, there are credit unions across the nation that have teams of financial advisors who are willing to work with you on any money goal you’ve set for yourself. All you have to do is ask.

Just stop by Central Willamette Credit Union in Salem, Oregon, for example, and we can get you on the right track today.