Bored Of Your Budget? 7 Strategies To Get More Out Of It!



Get_More_Out_Of_BudgetIllustrated by Ly Ngo.
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For most of us, budgeting ranks at the very bottom of our to-do lists, right below completing our taxes and visiting the dentist. In fact, two-thirds of Americans don’t even prepare a detailed budget at all, says a recent Gallup poll. According to researchers, “It is certainly possible that the strain of the recession or that modern banking technology — the ability to check one's bank account balance or get money at any time — has caused fewer Americans to feel the need to budget.”

I reckon we’re also experiencing some fatigue over the entire notion of budgeting. The term itself is enough to elicit dramatic eye rolls. And, since the recession, there’s been a growing emphasis on scrimping and saving and appropriating every penny into its own category, which — don’t get me wrong — has its merits, but in practice, can feel a lot like eating a bowl of your least favorite vegetable (for me, that’s zucchini).

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But, for those of us yearning for some financial order in our lives and ample wiggle room to actually start having a lifestyle, instead of just a life, budgeting can be instrumental. Here are seven tips on how to get the most bang for your budget.
Get_More_Out_Of_Budget_2Illustrated by Ly Ngo.
Retrain Your Brain
The B word gets a bad wrap. It feels restrictive and unrealistic. “Most people don’t like to budget because they view it as a sort of punishment,” says personal finance expert Stephanie Taylor Christensen. But, as with most financial hurdles, it’s important to change your mindset to make a forward leap.

Instead, try to think of a budget as a window of opportunity, a vehicle to help you get what you want in life, whether to get out of debt, save up enough to buy a home or just shore up a little extra savings each week to pad your rainy day account. “Train yourself to recognize that [a budget] ultimately represents freedom,” says Taylor Christensen.

Another way to look at it is like preparing to go on a diet. Losing weight for the sake of losing weight doesn’t give us the same sense of purpose and drive as losing weight to, say, fit into those skinny jeans before our high school reunion next fall, right?
Get_More_Out_Of_Budget_3Illustrated by Ly Ngo.
Be Flexible
Don’t assume that your budget needs to be written in stone. As life changes, so should your spending and saving needs. In the beginning, set conservative expectations, says J. Money, founder of the personal finance blog RockStarFinance. Otherwise, you risk setting yourself up for failure after a few months of frustration.

For example, proclaiming that you must save $10,000 in six months with your new budget could be far too lofty a goal. It’s better to start out by taking baby steps, like vowing to save a few hundred dollars in the first month after negotiating your insurance payments and cooking more at home.

You could also map out your first few months by reviewing your recent spending patterns. “A good rule of thumb is that your initial budget should match an average of your last three months of expenses,” says J. Money. “Once you have mastered that, you can then start tweaking your goals month after month to consistently pull in the wins.”

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Get_More_Out_Of_Budget_4Illustrated by Ly Ngo.
Fry The Big Fish First
Alright, so you’re revved up and ready to reappropriate your money. Where to begin? The low-hanging fruit on everyone’s bloated budget — those countless lattes on the way to work and bottles of water we buy at the gym — is usually what we’re told to eliminate first.

But forget that conventional wisdom, says Elisabeth Leamy, consumer journalist and author of Save Big. Her philosophy: “Don’t overstep the hundred dollar bills to pick up the pennies.”

“Save money on the big, boring stuff so that you have something left over for life’s little pleasures,” she says. The “big” stuff is synonymous with your “needs” and typically takes up 50 percent or more of your budget. It includes payments toward housing, transportation, groceries and, more than ever these days, health care.

A safe percentage limit for these big-ticket items, after taxes, is no more than 25 percent for housing, 15 percent for auto payments, 10 percent for groceries, and up to 5 percent for health care expenses.
Get_More_Out_Of_Budget_5Illustrated by Ly Ngo.
Hack Housing
Your biggest monthly cost is likely to be housing, whether you rent or own. If your monthly rent or mortgage check is eating up more than 25 percent of your take-home pay, you should seriously consider cost-cutting measures to create more breathing room in your budget. For example, if you earn, after-taxes, $5,000 a month, you want to aim to keep your monthly housing expense to $1,250 or less. This is a more conservative percentage than the 30 percent you may find in the financial planning textbooks, but in today’s world of overwhelming consumer debt and a finicky housing market, it’s smartest to play conservatively with housing. (One exception: If you live in one of the most expensive cities in the country, such as New York or San Francisco, it’s acceptable — and realistic — to allocate more toward housing, up to 35 percent. But you’ll need to make up for it elsewhere on your budget.)

Still gone overboard? For homeowners, this may mean refinancing your mortgage to a lower interest rate or, if you’re renting, re-negotiating your lease with your landlord. Offering to sign a longer-term lease, for example, may earn you a slight discount. A more dramatic step may be to move, altogether, to a more affordable place if your housing costs are way out of proportion.

Additionally, homeowners will have to set aside a big chunk for property taxes, but this may also be an area where you can lower your costs substantially due to inflated property valuations. Thirty to 60 percent of taxable property is, in fact, over-assessed, resulting in inappropriately high property tax bills, according to the National Taxpayers Union.

The NTU’s website has a checklist of steps to take to appeal your assessment. It usually involves an hour in a local courtroom presenting various documents, but it could be well worth your time. For new homeowner Allison Fishman Task, contesting her property tax bill in court won her a savings of about $5,000 a year. The New Jersey resident says her winning ticket was proving the “fair market value” of her home. “We had to document the value of similar houses sold on the same street within the year and to demonstrate that our house wasn't [purchased at] a ‘fire sale’ but was consistent with house values on the street,” she says.

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Prioritize Saving and Debt
Personal savings and debt are extremely important budget categories, though we tend to overlook them until the end of the month whilst scraping the bottom of the paycheck barrel.

While budgeting for the big stuff, remember to pay special attention to your future. That’s what saving and eliminating debt are all about, isn’t it? Aim to reserve 10 percent of each take-home paycheck toward a rainy day account for life’s urgent financial scenarios: a leaky roof, a broken down car, a surprise medical bill. Do this until you have at least six months of your bare-bones living expenses tucked away. If you have less than $2,000 saved for a rainy day, you’re considered to be “financially fragile,” and more than 50 percent of Americans wear this label.

Retirement is another savings bucket that, hopefully, you can save for through your employer sponsored retirement account or 401(k). If that’s the case, your contribution gets painlessly taken out of your paycheck. Try to save another 10 percent each year for retirement, including any match your employer provides. If you don’t have a 401(k), open an individual retirement account or IRA.

As for debt, assume a budget of up to 20 percent of your take-home pay toward paying off your student loans and credit cards and pay more than the monthly minimums to achieve this. For those of you whose minimum balances on all debt total more than 20 percent of take-home pay, you may want to seek the help of a credit counseling professional to help you negotiate with your lenders to modify your loans and make them more affordable. (Check out the various debt management programs offered by national nonprofits such as The National Foundation for Credit Counseling and Money Management International.)

A note about car payments: If these exceed 15 percent of your take-home pay, you may want to refinance. “Most people have never heard of this,” says Leamy. “Many credit unions specialize in refinancing car loans and anyone can join a credit union.”
Get_More_Out_Of_Budget_7Illustrated by Ly Ngo.
Budget for Your Lifestyle
Further down on your budget totem pole is variable spending toward things like vacations, new furniture, and shopping sprees. However tempting, if you’re saddled with debt and have little savings, budgeting for this category will be next to impossible to achieve. (All the more reason to squash that debt once and for all, for this is where the fun truly begins!)

But, even if you’ve been responsible with credit and have a nice savings cushion, all this miscellaneous spending, more commonly known as our “wants,” shouldn’t exceed more than 30 percent of your budget. That is, if you still plan to have a roof over your head and food on the table.

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How to prioritize your wants? Be highly discriminating and make it personal. Let’s face it: You can’t have or do it all. What are the three or four most important elements of your life that breed happiness? For example, if your top wants are travel, good wine, and working out, then that’s where your money should funnel. Everything else outside of those top categories isn’t worthy of your hard-earned money. Learn to ignore the sale racks and pressures to eat out with friends every night.

That said, just like with dieting, a realistic budget offers room to cheat or splurge. “One of the best ways to do this is to squeeze in some padding for a little guilt-free spending on whatever your heart desires. Nothing raises your spirits more than letting loose with a little cash that's already been accounted for,” says J. Money. “The amount will differ for everyone, but even something as small as $25 or $50 per month can work wonders in keeping you motivated,” he says.

Stick to Cash
Some expenses on your budget, like your mortgage, car payment, and credit card bill, are best paid automatically to ensure timely payments and no late fees, but using cash for some items can help free up some much needed space in your budget. For day-to-day expenses like food, gas, and incidentals, you may want to hit your bank’s ATM once a week and cover them with cash.

Sticking to cash — instead of plastic — makes you think twice about each and every purchase. In fact, an NYU study found that those who paid with cash — and cash equivalents — saved more than those who used credit. It turns out it’s more “painful,” so to speak, to pay with cash because you have to actually think and reflect on where that money is going — but that’s helpful if you’re trying to save.