Want to achieve financial success? It’s time to start tracking your habits.
Keeping an eye on your spending can give you a better idea of where your money is going each month – and where you could be saving more. You can use that information to create a clear budget that matches your lifestyle and saving goals. Crunch the numbers with this list of easy tips to help you start saving.
Know your numbers
Before you start building your budget, you need to know what you’re working with. Analyze your spending with these step-by-step tips:
1. Pull your bank statements. For the most accurate picture of your spending, make a list of all of your accounts. Checking and savings accounts are a given, but how many credit cards do you have? Make sure to pull the past year’s worth of statements from every account. Then it’s time to start taking inventory.
2. What’s fixed and what’s variable? This step is all about getting a bird’s-eye view of your spending patterns. The first distinction you need to make is between fixed and variable expenses. Fixed expenses, such as your mortgage, rent, insurance, and debt payment, are unlikely to change from month to month. But variable expenses like food, clothing, entertainment, and travel leave more room for adjustments.
3. Break it out into categories. Once you’ve determined which variable expenses are nice-to-haves rather than must-haves, break down purchases into smaller categories. Some providers automatically label purchases with certain categories like “automotive” or “dining,” which can help identify major themes. Whether you’re impulse buying clothes or spending too much money on subscription services, grouping these purchases into spending buckets can help you see where your money is going.
4. Look for patterns. Take a look at your entire year of spending, paying attention to times when you spent more than usual. For most people, this happens around vacations, holidays like Christmas or Thanksgiving, and even birthdays. And don’t forget about the one-off expenses that might catch you off guard each year, such as property or income tax season. Notice these patterns and flag them for next year so you can budget accordingly.
5. Use the data to create a new budget. Once you’ve taken a hard look at your spending habits, it’s time to compare them to your income and create a realistic budget for the year ahead. An easy way to approach budgeting is to break out your spending into three simple categories: must-haves (rent, food, bills, transportation), nice-to-haves (spending money, travel), and annual expenses (taxes, holiday funds). Add up your must-haves and annual expenses to create a baseline budget and save or spend the rest as you see fit.
6. Trim unnecessary expenses. Overspending? Pick an area or two where you can tighten your belt a bit. It’s all about setting financial goals and creating a budget that meets your needs. And while it’s tough to lower the big fixed expenses like housing or utilities, shaving off some spending in variable categories like dining or shopping can give you some extra breathing room.
7. Make space for savings. When preparing your budget, don’t forget to make room for savings. A savings account can serve as your emergency fund for unexpected expenses or a place to save for short-term or long-term goals like a car or travel.
8. Consider ways to earn more. If you’re struggling to move the needle on expenses, consider a side hustle. Whether you take on a part-time job, start an online business, or just list a few items for sale on a site like eBay or Facebook Marketplace, earning a little extra cash can help balance your budgeting equation.
Ready to set yourself up for financial success? At Origin Bank, our trusted advisors are ready to help you reach your goals. Visit www.Origin.bank to get connected with a local Origin Bank relationship banker today.
