10 Easy Steps to Improve Your Monthly Budget
It’s easy to think that one day we will have enough money. We’ll be satisfied, happy and content. But that one day will never arrive if we never make it happen. And today is the day to start.
What can you do TODAY to set yourself up for financial success? We have 10 tips to help you on that journey. The first few are very practical tips and the last several are mindset issues.
(1) Track Your Spending
It all begins with knowing where your money is going. Unless you’re tracking how much you’re spending and what you’re spending it on, you have no idea if your money is being allocated to the things that are most important to you.
Anyone who has done this has been surprised. And they weren’t surprised to find that they were overspending by $10 dollars a month, what they found was they were overspending by $50-$60 dollars a week on some things!
One person thought they spent $50 a month on lunch. By tracking their spending, they discovered that lunch was actually costing $200 a month. When they looked at the facts, they made a decision that other things were a higher financial priority than a restaurant lunch.
(2) Review your payments
The second way to improve your finances is to look at your monthly payments and figure out if the costs of standard items have escalate each year (like cell phones, cable, yard services, etc.) The impact of small increases over a long period of time can add up if you aren’t paying attention.
(3) Look at your PMI
You may be wasting money paying private mortgage insurance (PMI.) PMI insurance is required if you have less than 20% equity in your home. If your house is worth $100K and your mortgage is $95K you only have 5% equity and you have to pay PMI. If your house is worth $100K and your mortgage is $75K you have 25% equity.
If your original equity was less than 20%, and you have owned the house for several years, you may want to check out what your home is worth now, and how much equity you currently have. If your equity is more than 20% you may be able to negotiate with your mortgage lender to eliminate PMI. Or it may be time to refinance your mortgage completely, especially if refinancing means you’ll have 20%+ equity, no PMI, a lower interest rate and be able to pay off your mortgage faster.
(4) Earn More
Another good way to improve your monthly cash flow is to make more money, which is easier said than done. If you are due for a raise, ask for it. Document the reasons you deserve a raise and be sure they are well defined. Make an appointment with your boss to present those reasons in a polite, professional manner. If getting a raise is impossible, maybe you can get a part time job or turn a hobby into a money maker.
(5) Analyze Car Insurance Costs
Look at the latest invoice from your current insurance company then get a few quotes from other auto insurers for the same coverage. Once you have some facts and figures, give your agent a call and discuss the difference between your current rates and the quotes. Most of the time, your current insurer will match the competitor’s price, but if not, change insurers.
(6) Understand the Difference Between Wants and Needs
Understanding the difference between wants and needs is an easy money saver. Every advertisement we see is telling us that we NEED what they are selling. All we really need is food, clothing and shelter.
(7) Question Every Purchase
The way to discern between wants and needs is to question every single purchase. This helps you make fact based buying decisions and eliminates spontaneous purchases. It doesn’t mean you can’t spend money. It just means that when you do spend money you are making a conscious, responsible decision.
(8) Set Your Priorities
By knowing the difference between needs and wants, you can be sure you have the money to meet your needs and also figure out which of your wants have the highest priority.
You must focus on what is most important to you in order to have any hope of improving your finances. Would you rather eat lunch at a restaurant, or is your dream to retire early?
(9) Stop Shopping for Entertainment
Shopping as a form of entertainment is definitely a money waster. We were working with a couple who said “Every time we go to the mall, we spend $100.” The easy answer to that is “Quit going to the mall!” If you are shopping as a form of entertainment, you are certainly going to find things to buy, whether or not you need them.
(10) Don’t Compare Yourself to Others
Does envy tempt you to over spend? Comparing yourself to others can be a form of jealously, which is one of the works of the flesh that we are warned about in Galatians 5:19-21. When a friend buys a new car, goes on a luxury vacation, has the latest fashion or beautiful jewelry we can feel envious. It’s tempting to go out and buy the same thing. And that may make us happy for a few hours or a few days. But if we waste money and can’t reach important goals, sooner or later we’ll regret it. Instead of feeling envious, be happy for your friend and focus your thoughts and actions on your own goals and dreams.
People think a budget is all about being deprived. Our experience is that a budget is all about being focused. The success of budgeting comes from cutting away things you barely notice and diverting that money to something that has a higher priority in your life.
If you are trying to improve your monthly budget, start today. You may have some detouring, back tracking and restarting but if you never begin the journey you will never make any progress.
As the Nike ad states, “Just do it!”
