Budgeting is key to gaining financial freedom later in life. If you’re saving towards your down payment, perhaps with plans to buy one of the many Washington DC homes for sale, looking to add more to your investment portfolio, or maybe you simply want to take a short vacation, these basic budgeting tips can help keep you on track towards your financial goals.
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Pay with Cash
A great way to budget is to use envelopes. When you cash your check at the end of a pay period, divide your money into envelopes and label those envelopes: gas, groceries, entertainment, etc. You can create your own budgeting categories. You’ll notice you spend less money when you can see exactly how much you have. There’s something about cold, hard cash that makes it less tempting to spend frivolously, and using this method prevents you from overspending because once that money is gone, it’s gone.
Skip the Fancy Coffee
The average American spends $92 per month, or $1,100 per year on coffee. Think about the math and you’ll see how quickly it adds up. Say you start making a daily coffee run at the start of your working career instead of making coffee at home. If you work for 43 years before retirement, you will have spent $47,300 that could have instead gone into your 401k or invested and at least tripled its worth.
Use the 30-Day Rule
If you want to buy something, such as an expensive new pair of shoes or set of golf clubs, wait at least 30 days before purchasing. If you still want it after that 30 days is up and have room in your budget, then go ahead and buy. This is a great way to eliminate those impulsive buying decisions.
Keep the Change
Many banks offer programs that immediately roll your change over from a purchase into your savings account. If yours offers this, it’s definitely worth signing up for. It may not seem like a lot, but over time the small amounts really add up. Acorns, a fairly new company that’s become popular quickly, not only saves your change, but invests it into stocks and bonds. The 34 cents leftover from your purchase could eventually turn into hundreds of dollars and you will never even notice it missing.
Take Full Advantage of Your Employer Matching Program
Some employers will match up to 8% of your annual income that you contribute to your retirement plan. That’s essentially free money, yet it’s a benefit that many employees don’t bother taking advantage of or they don’t contribute the max. For example, if your salary is $60,000 per year and your employer matches 6% but you only contribute 4%, you’d be losing $1,200 annually, money that could be multiplied significantly if it’s invested wisely.
