3 Top Tips for Making and Sticking to a Budget

Whether you're newly married, just bought a house of your own, are in college, or are in the middle of your career, many of us struggle so much with our finances. In normal times, figuring out a budget and how to make your money work for you can be tough. During the COVID-19 pandemic, however, many found themselves in new, challenging situations; the long-term effects of the pandemic on finances are quite frightening as well. Thus, for many of us, 2021 is a time to reflect on our financial situation and plan for the future.

When my husband lost his job in 2019, we were sent into a scary financial whirlwind. Then the pandemic hit, and things got worse before they got better. We quickly realized that in our eight years of marriage, we really had never made a financial plan or budget to stick to. Thus, out of the wreckage of those hard years came some benefits--we learned how to create a financial plan and stick to it.

Here are three top tips if you're new to budgeting or if you just need a refresher. 

1. Know where you are starting

 The first key to a successful budgeting plan is to know exactly what position you are in. This means you need to get real about how much you are spending and where. You need to take a hard look at your debts and what money is going out. Some key questions to ask and to communicate with your partner about:

• How much money are you bringing in a month?
• How much is going out?
• Are you contributing to savings and retirement? What percent?
• What variable expenses are eating away at your money?
• Can you cancel any subscriptions you don't use?

Facing your actual financial position can be scary. So many of us prefer to stick our heads in the sand and just go with the flow. However, this can lead to issues down the road, especially when the unexpected happens (like a loss of hours at work or a layoff). Know your position and what your goals are.

2. Use Cash

Many budgeting experts, including Dave Ramsey, note that using cash can help you stick to a budget. I implemented an envelope system for our family and have seen great results. Having the physical cash in hand allows you to better assess how you are doing with your targets each month and gives you a visual for what the impact of each purchase will be. I am much less apt to hand over cash on a wasteful purchase knowing how little I will have left in my spending envelope for the month.

Create envelopes for the categories that make sense for you. I have one for spending, one for vet bills, one for entertainment and dates, and one for my hair expenses (which is my splurge). I also have a cash reserve for emergencies.

3. Reflect and Reassess Often

The most important thing to do in order to adhere to your budget is to constantly reflect on how you are doing. Each month, I assess how well I stuck to budget categories and how unexpected expenses tripped me up. My husband and I now have frequent conversations about our money and our future goals so we are on the same page.

A big part of financial planning is simply being honest and realistic about how you are doing. It's easy to ignore budget categories and just swipe the card. However, I have found that the peace of mind that comes from financial peace of mind is worth the extra effort.