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Despite being among the wealthiest nations in the world, recent reports suggest Americans struggle to create a budget, avoid debt, and build savings.
Most of us carry credit card debt of over $15,000, while nearly half of us don’t have enough savings to cover an unexpected expense of just $400.
Saving money can seem impossible when you’re paying down debt or living paycheck-to-paycheck.
However, a well-crafted budget can help you achieve your savings goals while leaving some wiggle room for life’s many pleasures.
How to create a budget and reach your financial goals
Not all budgets are created equal; they can be intimidating if you’ve never used one.
While cutting back on spending and squirreling away funds for a rainy day requires discipline, the following 10 steps will help you achieve your savings goals.
1. Be specific about your goal.
Stashing away money or cutting back on shopping may feel like a pain when you don’t understand what you’re working towards.
To combat this, make your goal as specific as possible: are your saving money to pay off your debts faster?
For a down payment on a new car? To finance a vacation to avoid going into debt?
Make your goal specific so you can refer to it when you need encouragement.
Visualizing the results of your savings efforts will go a long way in helping you stay the course!
2. Determine a budget baseline.
If you don’t know how much you spend each month on the necessities and extras, you can’t set up a realistic budget to meet your goals.
Track your spending for one to three months to determine how much money goes towards rent or mortgage payments, insurance, food, transportation, and utilities.
This process will also help you identify areas that need to be trimmed, like the excess spending on clothing or dining out.
Tracking your finances helps you become more aware of your financial habits, good or bad, so that you can finally take the steps to make lasting improvements.
A basic spreadsheet or an app like Mint can help you track your spending.
3. Automate your savings.
When you’re saving for any goal, it may be difficult to justify setting aside money when you’ve got bills, interest rates, or late fees forcing you to pay up.
Since there’s no immediate or obvious repercussion for missing your savings goal each month, it’s important to treat it as another bill!
Better yet, automate the savings by setting up a weekly or monthly transfer of funds between your checking account and the emergency fund.
This is called “paying yourself first.”
You’ll be surprised how easy it is to live on less when you have no other choice.
4. Reduce your expenses.
Look for ways to slash your everyday expenses to reach your goal faster.
For example, you can carpool or take public transportation to reduce fuel costs.
Instead of relying on takeout during the week, prep meals on the weekends and freeze them for quick access on weeknights.
You can also try budget hacking or reducing your fixed expenses by calling providers and requesting discounts or reduced payments on car insurance, mobile plan costs, and cable TV.
5. Shop more strategically.
Since you’re diverting money towards your savings goals, you have less cash for everyday expenses and purchases.
Instead of letting this reality bring you down, use it as an opportunity to shop more strategically.
Compare prices on products before you buy to ensure you’re getting the best price.
Tools like CamelCamelCamel.com and ShopSavvy can make this task easier.
You can also use Paribus to receive refunds from online purchases which experience a price drop within a certain time frame.
Finally, use grocery store circulars to create shopping lists so you always buy food on sale.
6. Curb spending creatively.
Cutting back on your discretionary spending can sometimes feel rough and lead to burnout and goal abandonment.
To avoid this, find savvy ways to curb spending without cutting out all the fun.
For example, tools like the Coupon Sherpa mobile app offer instant discounts to retail, restaurant, and local service establishments.
Currently, you can save up to 20% off your check from Olive Garden or use Target coupons for an extra $5 off purchases of $50 or more.
7. Diversify your income.
Expanding your income stream will provide protection against the inevitable swings of the economic cycles.
Plus, the extra money earned can boost your savings budget and possibly set you up for a new career.
Whether you want to turn a passion into a side job or believe your professional skills can help individuals or small businesses through consulting, check out upwork.com and Fiverr to start the process.
If nothing comes to mind, tap into TaskRabbit.com where you can help other people with their errands during your spare time for a small fee.
8. Stop eating out.
Dining out represents one of the main budget busters for most Americans.
If you rely on takeout most nights and go out to eat with friends and family over the weekend, it’s time to get serious about your budget and spending.
Cook at home and invite friends for happy hour or a potluck-style dinner.
When you are heading out to a restaurant, look for daily deals or discount restaurant certificates at Restaurant.com to cut costs.
You can also dine during happy hour, split an entrée, and skip marked-up drinks and desserts.
9. Find free things to do.
You can reduce spending on activities by taking advantage of all the free things your city offers.
Search your local newspaper’s online event calendar for local listings.
Many cities offer free movies in the summer and free fitness classes, too.
Simply taking a stroll down main street in your town will probably yield some fee-free diversions, like perusing an art gallery or watching a street band perform.
Bring water and snacks, so you’re not tempted to buy food!
10. Embrace staycations.
Besides fun splurges like eating out and getting a manicure, we often put vacations on hold when we are contributing to a savings goal.
However, it’s possible to enjoy some time off without the added expense of airfare, hotel stays, and rental cars.
Staycations offer all the benefits of a vacation without the extra costs!
Research areas nearby to which you and your family can escape for a few days.
This may be a no- or low-fee camping ground by a lake or simply a day trip to a nearby beach.
Pack a picnic and a camera to capture your memories and learn how easy (and cheap) it is to vacation at home.
Which of these budget tips will help you create the perfect budget?
Do you do some of these already?
Is there one you are excited to try out?
Let us know any other budget tricks you have in the comment section below.
Share this article on social media if you learned something new about creating a budget!