If you’re struggling to make ends meet, you know something needs to be done about your finances. If you aren’t sure what that might be, your budget may have the answer — specifically when you run through these five points. They may help make or break your budget, so let’s dive in and learn everything there is to know about this budgeting method.
1. Map your cash flow
When you’re stressed out about money, it’s easy to get caught up with the day-to-day struggles and forget about the big picture. In other words, you can’t see the forest for the trees.
Mapping your cash flow is like taking a snapshot of your finances with a wide-angle lens — it may help you see more than you would normally, and it could help you gain a better perspective on how you spend and save your money.
To begin, you must list every cent that comes in and out of your hands — making sure you don’t leave out any payment, bill, or purchase. Don’t underestimate a single item in this list.
Although the $3 you spent at Starbucks one Monday afternoon doesn’t seem like a lot — especially when compared to rent or online loan payments — the purpose of this list exposes the cumulative effect of all your spending. If you were to leave something out, your snapshot wouldn’t be accurate.
As step number one, looking at your finances provides the foundation for everything that follows, so make sure you complete this stage carefully.
2. Separate the needs from the wants
Once you have an accurate list, you’re ready to separate your expenses into categories. Popular categories include housing costs, insurance premiums, and payday loan repayments (if you have them).
As you start breaking things down, you’ll likely notice categories that aren’t absolutely necessary like toiletries, entertainment, and takeout. Keep an eye on these categories; they’re the “wants” of your budget.
You have the most control over how much you spend on wants rather than needs. For example, how much you spend on concerts and movies is something you choose, while how much you spend on insurance premiums and payday loan fees is largely out of your hands.
3. Eliminate the wants
Eventually, you’ll have a long list of wants you need to review. Since they aren’t absolutely necessary for your survival, they represent an opportunity for huge cash savings. If you’re able to reduce how much you spend on these categories — or eliminate them altogether — you’ll be able to free up cash.
Admittedly, this may be the hardest part of this five-part plan, as you’ll need to be honest about your habits.
Are you willing to cut out the convenience of takeout to save money? Will you be able to go without Prime or Netflix to lower how much you spend on subscriptions?
4. Set a new limit
Removing all the wants from your budget isn’t always easy, nor is it always the best way to save money. Cutting out all spending cold turkey can be punishing, and you may break down and spend more than usual as a way to boost your mood.
This second-to-last step will help you set the appropriate limit for your situation. Figure out how much you can spend on takeout to satisfy your taste buds without threatening your budget. Take the time to research streaming memberships to find the best one and unsubscribe from the rest.
5.Review its success
Last but not least, you’ll want to check in on your plans regularly to make sure it still fits your lifestyle week after week. If one of the limits you set in the step above doesn’t work, change it. Nothing is set in stone — not even your finances.
It’s not always easy finding the appropriate limit for your situation. If you aren’t sure how to set realistic savings goals, check in with the folks at MoneyKey. With a resource center that involves a budgeting guide and savings advice, they share ways to manage your cash in simple ways.
As an online lender of alternative borrowing options, the folks at MoneyKey understand how challenging it can be to eliminate spending on an already tight budget. That’s why they’ve tailored their resource center so that it’s practical for even those who rely on help for managing surprise expenses, like with a payday loan or installment loan.
Their numbers may be larger than you think when nearly 80 percent of the country lives paycheck to paycheck. But even those who don’t live paycheck to paycheck can take advantage of this advice, as well as this five-point plan. There are no restrictions stopping anyone from learning good money management. As long you’re willing to work hard, the five-point plan can help anyone spend less and save more.