3 Expert Tips On How To Properly Budget
You know, so you don’t have to give up avocados in order to buy your dream home.
If you were to ask us how many weeks it would take to save up for an Off-White Binder Clip bag, we could give you an answer in all of, what, two minutes. But ask us how to budget for things like buying a house or a three week trip around Europe and we’ll have no fucking idea. Can you blame us though? Some things that they don’t teach in school.
Seeing as how we’re working on getting our shit together all week, there’s no better time than the present to learn how to properly budget for, well, anything including the really big stuff. That’s where Rachel Cruze, New York Times best-selling author of Love Your Life, Not Theirs: 7 Money Habits For Living The Life You Want, whose mission is to teach others how to handle their money and stay out of debt (hi, over here!), to give us some easy to manage tips on handling our finances.
“Many people think that having a budget means having no life at all, but that’s just not true. A budget gives you freedom. Create a written budget at the beginning of each month. Figure out how much income you have to work with and list every expense you have. Assign every income dollar an outgo name [aka, the name of the expense that it’s going towards]. This is called a zero-based budget and it works! If you’re looking for an easy-to-use, free budgeting app, I recommend EveryDollar.”
Pay Off Your Debts Smallest To Largest
“When you have debt, you don’t get to decide what you do with your money. You lose the ability to make your own choices about your finances. Debt can’t be part of your plan! You must avoid using credit cards or getting car loans and student loans at all costs. Instead, save up and pay cash for items so you don’t have to worry about the debt they bring. Pay off your debts using the debt snowball. List your debts smallest to largest, regardless of the interest rate. Attack the smallest debt with every dollar you have, while making minimum payments on everything else. Once you’ve knocked it out, roll everything you were paying on the first debt to the second debt. Keep going until you’re completely debt-free, except your house!”
Build Your Savings
“It’s important to make saving a priority, because having nothing in savings adds to the stress during crisis moments. That’s why having a $1,000 starter emergency fund is key. After you pay off all your debt, increase that to 3–6 months of living expenses.”