Spending Guidelines You Can Benefit From

If you’re living paycheck-to-paycheck, you’re not alone. In fact, recent studies estimate that half of working Americans are getting by this way. If you’re tired of waiting on your next paycheck, only to wonder where all your hard-earned money went after paying bills, now is the time to establish a monthly budget and spending guidelines to help you get ahead.

Know Where You Stand

Before you can create a budget (or as I like to call it, a spending plan), you need to know where you stand. Determine your monthly cash flow by totaling up your monthly income, then subtracting your monthly expenses from that number. A good way to do this is to pull up recent months’ bank and credit card statements, then averaging out the numbers. When tracking your spending, be sure to separate these expenses into fixed costs (such as your rent/mortgage, utilities, and debts) and discretionary spending (things you choose to spend money on, like shopping and recreation).

Determine Where You Can Cut Back

Once you have a better idea of your cash flow, you can start looking at ways to cut back on your spending—especially if you’re spending more than you bring in each month. Discretionary spending is usually the best place to start when cutting back. For example, you might not need that $50-per-month wine delivery subscription, or you might be able to save $100 per month by simply bringing a lunch to work instead of eating out. These small changes add up to significant savings over time.

Implement Spending Guidelines

Next, with your financial goals in mind, it’s time to start setting some specific spending guidelines. There are many ways to track and control your spending, including plenty of apps and programs that will do most of the work for you. One tried-and-true method of sticking to a budget, however, is known as the “envelope method.” This involves literally placing allocated cash into envelopes for everything from paying bills and buying groceries to personal spending. Once you’re out of cash in the envelope, that’s it. Many people find that this method helps them avoid impulse buying that is common when using a credit card or bank card.

Increasing Your Means

We’ve looked at how you can improve your financial results by living within your means above. However, there is two sides to the financial equation. The alternative option is to increase your income. For people who find little room for adjustment in their monthly spending, or prefer not to have to make that choice, increasing your income allows you to still get the financial results you want. Consider how you can put your entrepreneurial spirit to work!

Check Your Progress

Life happens, so the spending guidelines that work for you now might not work a few months down the road. Be sure to revisit your plan regularly to reassess and make changes as needed.