With the more financial challenges ahead due to COVID-19, now might be the right time to think about how you want to spend your money. Below are some tips for budgeting.
1. Set goals
When planning a trip, you’ve got to know where you are going first. It’s the same for budgeting – it’s important to know what you want and what your goals are. It doesn’t have to be a 5-year or 10-year plan. It can be as short as a week or a month. Below are some examples of goals you can set for your budgeting:
- Saving $50 a week
- Spending less than 20% of your monthly income on clothes
- Buying a car in a year
- Buying a house in 5 years
2. Figure out where your finances stand
Knowing where you are starting from is as important as knowing where you are going. Start thinking about how you are spending your money and compare it to your goals. Then you can figure out how much you are spending, what you’re spending on, and prioritize buying your groceries or paying back your debt if any.
3. Develop a plan
Now that you know your destination and origin, you can start planning your budget. This is where you ask yourself questions like, “Where should I cut back my spending on and by how much?” If it’s hard to develop your own plan, you can use widely-used frameworks such as the 50/30/20 Budgeting Rule. Learn about it here. It is important to make the plan as realistic and specific as possible and it will help you stick to your new budgeting plan.
4. Try free online tools
As you are managing your finances per your budget plan, consider using online tools that help you track your income and expenses. Mint is a free online tool that you can use to input your budget and track your finances more easily.
5. Consider getting new credit cards
If you use the right credit card with cash back rewards and points on things you spend a lot on, it will also help you achieve your budget goals much faster! For example, if you are spending a lot on groceries, credit cards like American Express Blue Cash Everyday® Card will give you 3% cash back on your grocery purchases. This means that if you are spending $500 on groceries every month, you can save $180 a year. If you want to explore more credit cards, try our credit card questionnaire to find the right card for you.