Making a budget is the first step to being able to reach your financial goals. It’s easy to think that you will be able to save more money or pay off debt at a later time – like when you get a raise or receive a bonus. Unfortunately, without a budget, any raise or bonus is likely to get used up by extra expenses, leaving you in the same position you were before.
Fortunately, even without a raise or bonus, establishing a budget can help you save more money and/or pay off debt by establishing reasonable limits on what you should spend.
But where should you begin? We recommend starting with food. Food is an expense that could happen three times a day, every day. Additionally, food is an expense where many people are spending more than they really need.
When establishing a budget for anything, it’s important to look back at what you have spent in the past to give you an idea of your spending habits. This is pretty easy to do if you use a debit or credit card for most of your transactions. Simply add up the amount of money you spent on food over the last three months to get a monthly average. Additionally, separate out the amount of money you spend on groceries and what you spend on eating out.
From there, think about whether your grocery budget gave you too much food (meaning you threw away a lot or haven’t eaten it yet), too little food (you were eating out more frequently because you didn’t have food at home), or was just right (you ate most of the food and didn’t feel like you had to eat out because you didn’t have any food at home).
Additionally, review how much you spent on going out to eat. Did that seem like a normal amount of eating out? Did you go out more often or have a couple more expensive meals than you normally would? Try to determine whether that dollar amount seems high, low, or right where it should be.
For example, lets say you add up your expenses from the last couple months and on average you spend $400/month on groceries and $400/month on eating out. You feel that your groceries didn’t last very long and you had to eat out more often because of it. Based on that information, you should budget more money for groceries (try $500 to begin) and less money on eating out.
The great part about spending more money on groceries is that it’s far cheaper to buy groceries to make meals for yourself than it is to eat out. Because of that, you could probably drop your eating out budget to $200, saving you $100/month on your overall food budget. Now that you know you will be spending $100 less than you normally would, you can easily take that extra $100 and put it into savings.
Here’s how it breaks down…
Monthly average over last three months:
$400 – Groceries
$400 – Eating out
$800 – Total
New budget:
$500 – Groceries
$200 – Eating out
$100 – Savings!
$800 – Total
Now, if budgeting were this easy, everyone would do it. The hardest part about maintaining a budget is you have to work at it to stay on budget. It’s easy to say you will spend less, but difficult to actually do that if you don’t track what you are spending. So, if you are trying to follow a budget for your food, you have to keep track of how much you are spending as you spend it. That way you will know if you are spending too much and can cut back to make sure you don’t go over your budget.
Although budgeting can seem difficult or overwhelming, it is one of the best things you can do to help you reach your financial goals.
If you would like to learn more about establishing a budget, or would like help saving money, please stop by a branch or give us a call at 800-835-3400. We’re here to help you on your financial journey.