5 Ways to Control Your Budget Before it Controls You

If you have no financial plan, it’s likely that your budget feels out of control. More specifically, it’s likely that you feel like your budget controls you. In a sense, it does. Not having control of your finances often means that you overdraft your checking account or don’t have money to pay for an unexpected doctor’s visit. The key to breaking out of this cycle is to make a plan for your money. If you’re just starting this process, here are five things you’ll want to do get control of your budget.
1. Make a Budget
To gain control of your finances, an article on The Balance recommends that you start by making a budget. A budget diary will help you determine where you spend money if you’re not sure where to start.
For the next month, write down everything you spend money on. Once you know how you spend your cash, it’ll be easier to look at where you can cut expenses. This principles works for both your professional and personal lives. Your goal should be to spend less than you earn, regardless of whether you’re working on a work or a personal budget.
2. Assume an Annual Increase
Most people would like to assume that their current income will be enough in the future. However, Realtor Mag cautions people not to take that approach with their money.
Instead, it’s best to assume that your cost of living will increase by at least two percent each year. If you’re about to sit down to write out your yearly budget for next year, add that two percent to each expense column. This ensures that you won’t go over budget next year.
3. File an Extension
It’s common for accounting firms to hire temp workers during tax season. However, these professionals may not be completely up to speed when it comes to understanding the tax codes for the current year. This is an area of expertise that develops over time.
To work around this, you should file for a tax extension. This give the tax professionals in your accountant’s office a chance to know the tax codes better. It also decreases your likelihood of getting audited.
4. Renegotiate Costs and Contracts
Most people don’t think to renegotiate their contracts each year for their expenses. However, a Forbes article says that it’s a mistake not to renegotiate. By talking to your credit card or car insurance companies, you may be able to save some serious cash in the coming year.
Before you talk to these vendors, search around for deals on cheap auto insurance or better credit card interest rates. Once you’re armed with this knowledge, talk to the vendors to see if they’re willing to lower their rates. If they’re not, be prepared to go elsewhere to get cheaper services. As a side note, if your insurance or credit card companies know that you’re willing to leave, they may renegotiate a new price with you even if they originally told you that they wouldn’t.
5. Make a Savings Plan
If you don’t have a dedicated savings plan, you won’t have any money for a rainy day. It’s really that simple. The rainy day could be an emergency. It could also be the funds you put away to pay for your kids’ college educations or for your retirement.
Typically, financial planners will suggest that you save at least 15% of their income each pay period. That money goes into your IRA or mutual fund accounts. You should also have an emergency fund of at least a thousand dollars. This money you put aside for emergencies like an unexpected trip to the ER or for new winter tires. This latter fund should be replenished each time you use it.
Final Thoughts on Controlling Your Budget
Controlling your budget can be simple even if it’s not exactly easy. First, you need to know where your money goes each month. Second, you need to have a plan in place for saving money. Not only do you want to put money away each month, you also want to save money on expenses where you can. Finally, you should assume that your living expenses will increase over time. By building these into your budget each year, you’ll never be surprised when inflation happens.
