Most Americans balk at the idea of sitting down and establishing a firm budget each year. They worry that they’ll have to give up many of their favorite indulgences, and the financial reality check is certainly an uncomfortable experience for many.
However, coming up with a budget doesn’t have to be a painful process. It gives you the opportunity to decide what expenses are important to you and your family, and you’ll also start to picture your financial situation more clearly.
If you’re hoping to build a budget that’s financially smart but that doesn’t require too many terrible sacrifices, here are a few tips to keep in mind.
Budget for Your Hobbies
Your budget needs to work for you, not anyone else, so it should reflect the places you truly like to spend your money. After planning out how much you need to spend on necessary expenses, like rent, food, utilities, and transportation, take some time to figure out how much you can spend on your hobbies without taking away from your savings account or necessities.
For instance, if you adore painting, it’s probably a good idea to budget for art supplies each month. If you’re an avid golfer, set aside a little money for the sport’s expenses. Having a budget doesn’t mean you have to stop spending money on the things you love. It just means you know where all of your money is going.
Not All Gyms Are Worth Their Heavy Price Tags
Many people consider their gym membership to be a necessary expense, just like rent or gas. The problem is, not all gyms are created equal. Some are superior to others, but does that make them worth their hefty monthly fees?
Do some research to see if you can downgrade a little to save money. You might be surprised by how many gyms are just one step down but substantially more affordable.
Travel Can Certainly Be a Part of Your Budget, If You Plan Wisely
Budgeting might actually be able to help you save more money for travel, if you’re looking ahead and setting aside the proper amount each month. Vacations and new experiences are important, so don’t let them fall by the wayside because you’re too busy spending money on other things.
If you’re not trying to spend a lot of money, consider going to a family-friendly or adults-only resort. You pay for these ahead of time and it includes food, drinks, and activities. When you actually get there all you need is spending money. Allot a specific amount of each paycheck toward a travel fund, and before you know it, your newly-crafted budget might actually start allowing you to travel more than you did before.
You Shouldn’t Feel Bad About Occasionally Eating Out
The average American household spends more than $3,000 on eating out each year, so it’s undoubtedly a good idea to cut back on the amount you spend at restaurants and fast food chains. Still, that doesn’t mean that you should start forcing your family to eat at home every single night.
Leave a small part of your budget open for the occasional night at a fancy restaurant or those times you simply need an In-N-Out burger. Not only will this make your budget feel a little friendlier, but it will also make it more realistic. After all, it’s not like you were never going to eat out again, so it makes sense to budget for those meals in advance.
It Never Hurts to Leave Room for Entertainment Expenses
Whether you’re a concert junkie or a frequent movie theater goer, your budget should reflect the kind of entertainment you like to participate in. Think about how much you spend on entertainment each month and see how it fits in with the mandatory expenses you already calculated. Then, come up with a sum that will allow you to indulge every now and then but that won’t wreck your carefully-crafted budget.
Don’t Forget to Budget for Your Debt Payments
The typical American graduates with more than $30,000 in student loan debt, and that doesn’t even account for credit cards, auto loans, homeowner loans, and other forms of debt. No matter how heavy your ball and chain might feel now, it’s vital that you plan to knock out those payments as soon as possible. Sure, it might feel like a sacrifice at the moment, but it will prevent your credit score from needing repairs and allow you more freedom in the future to spend money on the things you actually want to.
The Sooner You Save for Retirement, the Better
Although putting your hard-earned money into a retirement fund might seem like a sacrifice at the moment, you’ll thank yourself immensely once you get older. Nearly half of all Americans have yet to start planning for their retirement financially, which is detrimental to both the individual and society as a whole. Do your part to prepare for the future by contributing as much as you can to your retirement account each month. It’s especially important to do so if you have a 401(k) with a company match.
Budgeting Doesn’t Have to be Hard
Although budgeting might sound intimidating, it can actually provide you with more financial freedom, not less. Decide what expenses are mandatory, as well as which ones are important to you. That includes budgeting for hobbies, entertainment, eating out, retirement, debt, and travel. Use your budget as an opportunity to spend money on the things that matter instead of viewing it as a painful sacrifice.