If a budget is the foundation of sound money management, why is it so challenging to establish one and stick to it?
MSUFCU Chief Marketing Officer Deidre Davis offers advice on ways to get back to budgeting basics in 2022.
A budget is a plan for using your money based on priorities you identify and choices you make. It is a tool to assist you in doing what is most important to you. Setting financial goals and incorporating them into a budget results in smarter spending choices.
Start creating a budget by prioritizing monthly spending from necessities to wants. For example, your mortgage or rent, car payment, and utility bills need to be paid, while dining out weekly is likely something you want to do, but don’t have to do.
Next, subtract those expenses from your net income. Then, identify your financial goals and add them in to your budget. These might include saving for a down payment for a car or home, or an upcoming vacation. Finally, adjust your planned spending, if needed, by reducing expenses or adding income.
Correlate your budget with your financial goals based on your priorities. For instance, determine when you want to make a purchase or spend money and how much you will need. Based on this information, you can set a savings plan to reach your goals.
Open sub-saver accounts — separate accounts within your main savings account — for each goal. To make saving easier, set up automatic transfers to those accounts each month or with each paycheck.
A good way to maintain your budget is to create an emergency fund so you have cash on hand for unexpected expenses such as car repairs or medical costs. You can use these funds instead of money allocated for other purposes or a credit card, which can add to your debt.
Also, review your budget often to determine if you need to spend less or can spend more in some categories. For example, if you are working from home several days a week, you may spend less on gas and lunch. You can also look for ways to save money, such as canceling some streaming services or the gym membership you don’t use. Put these extra funds toward paying off your debt or into your savings accounts.
The MSUFCU Mobile app allows members to keep track of their accounts, automate their savings, transfer funds, and more. The Credit Union also hosts free in-person and virtual seminars on a variety of financial education topics, including budgeting, managing your credit, and saving for retirement. In addition, our Savings Builder℠ account helps members save faster by paying more dividends on initial deposits.
Learn more by visiting msufcu.org.
This segment is sponsored by MSU Federal Credit Union.