We all understand the importance of having a budget, but making one or sticking to it is something a lot of us struggle with. According to the SunTrust National Financial Confidence Poll, only 37% of Americans follow a formal budget “often” or “completely”, and only 33% establish and review a financial plan each year.1 But did you know the benefits of following a budget isn’t just about keeping on top of your finances? It’s also a great way to improve your happiness overall.
When you’re financially confident, you’re happier in all aspects of your life. In fact, those who deem themselves as having high financial confidence rate themselves at 8 out of 10 on the happiness scale. Whereas those with low financial confidence drop to 6, and respondents who have very low financial confidence coming in at just 4 on the scale.1
The SunTrust National Financial Confidence Poll also found that 84% of those who took action to improve their financial situation–whether that was by budgeting more seriously, paying off credit cards or simply making more of an effort to control their spending–felt a positive impact on their life and, in turn, were happier.
There are five main reasons cited for financial confidence: controlling spending effectively, managing debt, building emergency savings, saving enough for retirement/investing wisely, and maximizing income opportunity.1 Apart from maximizing income opportunity, all of these reasons for financial confidence are linked to budgeting habits.
Here are some useful tips to get you started on your budgeting journey:
- Track your spending – Make a list of all your expenses (rent, bills, groceries, and so on), and start to track receipts or bank statements. Over time, see where you can make cutbacks. Whether it’s changing the grocery store you go to, swapping takeout for a home cooked meal a couple nights per week, or switching energy providers, you’ll be surprised how much you can save with small changes. Find out more tips on how to do this here.
- Evaluate wants vs. needs – After you’ve subtracted your mortgage or rent payment, recurring bills, and savings from your monthly income, what’s left is what you have to budget. The trick to staying on track is to separate your spending into wants and needs. For example, you need to eat, right? Based on how you budget, you can determine how much you can order takeout vs. how much you need to cook at home. You can do both – it’s just a matter of balancing to best suit your budget and goals.
- Give yourself an allowance – Self-regulate your income by separating your money into different accounts. You can have an account for necessary spending (like mortgage or rent, utilities, and other bills), and a separate account for your “wants” spending. Consider giving yourself a weekly or bi-weekly allowance for “wants” spending to help you stay in control of your budget. If you keep your funds separated, you’re less likely to stray from the plan you set out.