Update your budget
A properly organized and managed budget can help you avoid getting into debt and achieve your financial goals, whether it’s a well-financed savings or retirement account, a college savings plan, an emergency fund, or anything else. As long as you’re within your spending limits, you can splurge on extra goodies without having to feel guilty. And despite what you may think, budgeting doesn’t have to be complicated.
The main idea is to figure out how much you’ve been spending and earning overall and then set goals. The difference between your monthly income and spending is what goes into your general savings or retirement. If there’s little or nothing left, it’s time to make some choices. Do you really need 500 TV channels? Can you negotiate discounts on ongoing services, such as telecommunications? Can you switch to a credit card that features better rewards and lower costs?
To make tracking your spending easier, create broad categories, such as mortgage or rent, utilities, insurance, and car loan payment. For keeping tabs on everyday spending, make a category for one or more credit and/or debit cards, and use those for most of your general purchases. If you end up going over budget, reduce your spending as much as possible on everything you can until you're back under control.
Of course, if you want to track your spending more closely to determine, for example, how you’re spending each month on pet food and dining out, go right ahead. The main thing is to set up a budget that won't drive you crazy trying to maintain it.
One caution: Don't put major purchases, such as an emergency roof replacement on your home, into your monthly operating budget, or you'll probably bust it. Major spending should come out of your savings or emergency fund, or from an account set up for a particular purpose, such as replacing your car. If you’re financing part of a major purchase, take any significant down payment out of savings and include the monthly payments in your operating budget.