Four Tips for Creating a Budget

Having a budget is a great benefit for people who are having trouble paying their mortgage, but it is also a good idea for potential homebuyers who want to take advantage of today’s low mortgage rates. A budget will help you free up money that you can put towards your mortgage payment or for a down payment on a new home. Here are some tips for creating your budget and sticking to it.

1. Make it a family event. It’s going to be difficult to get on a strict budget if the entire family isn’t on board with the idea. It doesn’t help for just one person in the family to cut down on expenses. The entire family has to do it. Set aside a night where you can sit down as a family and discuss getting on a budget and the types of expenses that each member of the family can cut out each month.

2. Think long-term. When you buy a $3 coffee every day, it might not seem like much. But when you put it in terms of an entire year, that’s more than $1,000 each year just on coffee. Look at your daily or regular routines and determine how much it is costing you during an entire year. Then look at the ones you are willing to cut out. You may find less expensive alternatives if you really think about it.

3. Set aside money for emergencies and savings. These are two important things you should always think of even when you are on a budget. If you don’t have money set aside for emergencies, you end up using credit cards or other more costly methods that end up costing more than it should. Having money is savings is also a great idea for long term financial benefits.

4. Use the envelope method. The envelope method involves putting aside money for your monthly miscellaneous expenses by having an envelope labeled for each of those expenses and then putting a predetermined amount of cash in each of those envelopes for each respective expense. For instance, if you set aside $30 for coffee each month, put $30 in your “Coffee” envelope and only use that money when you go get coffee. When that $30 is gone, you have to wait until the beginning of the next month for another $30 to spend on coffee. It helps discipline yourself while saving money each month.

After setting up a budget, you will be surprised how much money you can save at the end of each month and at the end of the year. You can then start putting more money towards your mortgage payment and pay off your home faster or save up that down payment for a new home sooner.