What is "smart budgeting" and how can it tighten your expenses and help you get ahold of your finances
Creating and maintaining a successful budget is one of the most vital aspects of financial planning, and subsequently, financial wellness. It’s a habit that’s hard for some and natural for others, but a cornerstone of healthy finances nevertheless.
We’ve seen a seemingly limitless number of ways to budget, and there’s certainly not a one-size-fits-all approach to it. What’s important is finding a method that works for you, your goals, and your lifestyle.
The world is unpredictable, and what worked yesterday might not work tomorrow. So, even if you’ve established a sustainable budget, there may still come times when you’ll need to make changes, sometimes hard ones.
;TLDR? Budgets are necessary, and sometimes cash is tight and they’re uber necessary. We’ll help you navigate your plan either way.
Reasons to tighten your budget
One of the keys to a sustainable financial plan is adaptability. The economy moves in cycles, so things change all the time. Our finances are just a reflection of that ongoing change. Sure, we can certainly take steps to prepare and insulate ourselves from those effects, but we’ll never be totally exempt.
Ultimately, there are two kinds of events that could change our budget.
Out of our control
Our budget will have to endure economic waves such as the likes of inflation, recessions, potential layoffs, unexpected expenses, and a variety of surprises life throws our way at any given time. When those inevitable winds of change come knocking, a budget can’t just remain stagnant; it must adapt.
In our control — personal changes
Inflation definitely makes you pinch your pennies, but personal emergencies or desires will, too. If you find yourself needing to save for a big upcoming expense, or saving for a car, looking to buy a new home, had a new baby, or maybe had an unexpected medical expense? Yep, those variables definitely influence your budget. We can help.
Buckling down on your budget
Let’s say you find yourself in one of these scenarios listed above, (you will, trust us). How do you adjust your budget to make room for the changes? It can feel impossible at times, especially if you find yourself feeling broke. But trust the process, it’s possible. #YouGotThis
Here are a few budget-tightening power tips
The obvious but not easy: The easy answer here is to simply make more and spend less. Sure, that’s easier said than done, but it’s the most obvious answer for a reason; because it’s effective. If you’re able to take on more work, search for time-efficient opportunities that fit into your wheelhouse, and sacrifice budgeted items that aren’t needed.
Organize, organize, organize: It’s impossible to know if you have enough if you don’t know what you have! Spending and income oversights are probably one of the most common budgeting mishaps, and can cost you thousands. Pop into User Summary to review your weekly/monthly/annual transactions and flag anything fishy.
Deep dive on your line items: We can be quick to classify a budget item as an essential without looking into it. A prominent example of this is the groceries section, where it’s easy to buy stuff we don’t need and just chalk it up as a non-negotiable essential in the budget. This is why it’s important to review transactions, even in “essential” categories like utilities and groceries. Doing so will almost always reveal some savings.
Create a buffer if possible: A budget isn’t meant to help us spend all of our money, it’s meant to organize it. Part of that structure should include a buffer region—a gray area of money that’s not spent and saved for unexpected costs or saving and investing. If you can, incorporate this into the budget ASAP, even before you find yourself needing to tighten it.
Holiday considerations: Year’s end is often one of the hardest times to tighten down on your budget. With the holidays come gatherings and gift-giving events at every turn. The best remedy of year-end gift-buying stress? Budget for the holidays ahead of time (plus save money by giving loved ones DIY gifts). If you find yourself without any wiggle room when the time comes, that’s okay too. Remember, gift-giving is optional, and your financial health is so much more important.
Making it a habit
Oftentimes, it’s the unexpected bumps in the road that are the biggest teachers. The pandemic is a prime example of this. It set off a chaotic couple of years of which we’re still riding the ripples, taught all of us just how fragile life and “normalcy” is, and how important financial preparation is.
You might find yourself getting that wake-up call now. It can be scary at first, but in hindsight, it will serve as a great reminder. Being forced to tighten your budget is a great opportunity to realize the importance of saving, investing, and expecting the unexpected.
But hey, the fact that you’re here with us now says a lot — you’re well on your way to financial wellness. There’s still room for improvement though, and your app is a great place to start. Don’t forget to log in at least 3 minutes per week, and keep at your to-do list!