You’re broke. Thanksgiving and holiday travel costs piled on to missed work, gift buying, and treat-yourself nights out, and now you’re afraid to check your bank balance or — heaven forbid — your credit card statement. We’re here to remind you that it’ll be OK. The cash hemorrhaging has come to an end, and pinching your pennies while carefully planning your upcoming expenses can help you to rebuild a nice cushion in your checking account.
First things first, add up all of your monthly expenses — and be honest with yourself. If you’re spending $300 a week on nights out for dinner and drinks, your budget needs to reflect that. Start with the big ones: rent, utilities, car payment, cell phone, student loans, etc. It helps to go back through your checking account to see where your money went — small bills like Netflix, gas, or grocery store stops are easy to overlook but add up quickly. Ideally, this total number should be less than your monthly income.
Now that you know what you are spending each month, take a closer look. Are you happy about spending $200 every month on Goldfish crackers, frozen pizzas, and 30-packs from the grocery store? You very well might be. Could you cut back on your entertainment expenditures to put more into your savings? Think about every dollar you know you have coming to you and assign it a place.
If you want to get ahead of the game, also consider how much you want put into your savings account each month. Think about your financial goals and timeline. If you want to buy a new car in a year, set aside about $170 each month to give you a healthy $2,000 down payment next year (plus if you’re used to spending that much monthly, the car payments will be easier to swallow). Not sure where to start? Try the 50/30/20 rule: Spend 50% of your income on the essentials, 30% on personal expenses, and save the last 20%.
With all of this in mind, add up your goal monthly expenditures. This is what’s known as a “budget.” Anything left after your budgeted expenses can sit in your checking account for pop-up costs, like a birthday gift, automotive expenses, or if you decide you need to get the new iPhone. If you struggle with budgets, try these easy tips:
- Put your bill due dates into a calendar app. Set reminders so you know what is coming out of your account and when, so there are no surprises when you check your balance. This will also help you visualize your expenses, giving you a better idea of when is an OK time to spend money, and when things might get a little tight.
- Set up automatic transfers from your checking to your savings. Use the calendar to pick a date that won’t interfere with other expenses. It’s easier to save when you don’t have to remember to do it or hold last-minute negotiations about how much you really need to save. With auto savings, you won’t accidentally spend that cash, and your money will quietly be piling up for you.
- Try a cash-based budget. It’s so easy to just swipe your card and make your dreams come true. But let’s be honest: you’re not keeping track. Instead, go to the bank and withdraw cash for your food and entertainment budgets. When you’re out of money, you’re out of the game. (If you want to be really stringent, you can keep them in separate envelopes.)
It sounds complex, but after you get your bills gathered up, a budget comes together pretty quickly. And once in place, you’re just racking up cash month after month, putting you leaps and bounds ahead of the 49% of Americans with no savings to speak of. All of that holiday spending will be nothing but fond memories in a few months’ time.