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Making & sticking to a budget
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Creating a budget may seem like a daunting task, but it doesn’t have to be. There are several tools and techniques available that can really simplify budgeting and help you reach your goals.

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Keeping a detailed budget can be one of the best ways to help you save money and avoid overspending,

but not everyone has the time—

or the desire—to sit down with a spreadsheet on a regular basis.

You may have even tried to keep a budget before but it didn’t work out – you’re not alone.

Fortunately, there are some ways you can manage your money without a traditional spreadsheet.

Now, the most important part of managing your money is making sure your needs are covered. This will require a bit of math, but it doesn’t need to be complicated.

Start by figuring out all of your regular monthly expenses. This will be your regular bills--like rent or mortgage payments, all your utilities, insurance payments and any other loan or credit card payments you make each month.

Then, estimate your other necessary expenses like what you spend per month on groceries and transportation costs.

Add all these costs up and you’ve got your baseline--what you need to cover every month.

:56 Bonus Feature Content – Establish Your Baseline Costs

To create a worksheet of your expenses, tally up the necessary expenses you have each month. That will help you determine how much you need to set aside for your needs, and what you can aim to have left over for savings and discretionary spending.

List out those required monthly expenses, and estimate where necessary. Be sure to include: rent or mortgage, car payment/gas/other transportation, car insurance, health insurance, child care, cable/internet, cell phone, utilities, credit card, student loan or other payments, groceries, household spending (including diapers, toiletries, etc.), and whatever else you spend your money on. Total the cost of all of those things and that will give you’re your monthly spending.

Back to video.

When it comes to paying your regular bills, setting up alerts on a calendar can help to remind you to pay them a few days before they’re due.

Or to make it even easier, you can try automating some of your payments. You can sign up for automatic bill pay with your utility companies, lenders, and in some cases even with your landlord. The amount you owe each month will be automatically withdrawn from your bank account—or charged to your credit card. Automating payments can save you time and effort every month and help make sure your bills are paid on time, just be sure you always have enough money available in your account to cover all of your automatic withdrawals. And if you use a credit card, make sure you can pay the balance in full each month in order to avoid paying interest on those charges. If you change your mind and decide that automated payments aren’t for you, you can always cancel your scheduled payments and go back to paying manually.

Automatic payments can also be a great way to help you systematically pay down debt if you set up extra payments toward your loans

[visual of regular extra payments being plugged into an automated bill pay box and a visual of a loan being paid off earlier]

 And they can help you grow your savings if you set up regular contributions to a savings account.

[visual of regular contributions to a savings account growing over time]

1:58 Bonus Feature Content – Save for emergencies

Emergency fund goals

Building an emergency fund is a great way to ensure you’re covered for unexpected events like a car repair, big medical bill, or job loss.

A common goal is to save three months’ worth of expenses.

If you have an irregular income or just want more piece of mind, consider saving nine months’ worth of expenses.

[visual of expenses saved:
3 months expenses saved
6 months expenses saved
9 months expenses saved]

Emergency funds aren’t built overnight, but setting a target goal and working toward it will help you create a buffer – meaning you won’t have to borrow money when you have unexpected expenses or an income loss.

Back to video.

This can be especially helpful, if you’ve had trouble saving in the past.

To help yourself prioritize saving, you can try thinking of saving as a bill you have to pay to yourself. Even if it’s just a small amount, making automatic payments to yourself can help you build up an emergency fund or a retirement account.

2:15 Bonus Feature Content – Think about retirement

Retirement goals

It’s not a simple matter to figure out how much you’ll eventually need. Here is one hypothetical example of a set of goals for retirement savings where you’d be aiming for 7 years’ worth of your salary by retirement.

Though not easy, setting short-term savings goals throughout your working life can make planning for retirement more manageable and can help you stay on track.

Keep in mind that your own plan will probably differ based on factors that we’ll look at at the end.

In your 30’s, have 1-2 times your annual salary in your retirement accounts.

In your 40’s have 2-3 times your annual salary in your retirement accounts.

In your 50’s have 5 times your annual salary in your retirement accounts.

By retirement in your 60’s, have 7 times your annual salary in your retirement accounts.

This is just one hypothetical guideline. When creating your own set of goals, you’ll want to take into consideration these factors which can influence your targets:
How much you’ll need in retirement
When you plan on retiring
How healthy you are and how long you might live
Your marital status
Whether you will be receiving a pension
And whether you rent or own your home

Setting benchmarks that are unique to your own specific plan can help you start saving early and stay on track.

Remember, in your 30’s, have 1-2 times salary, in your 40’s 2-3 times salary, in your 50’s 5 times salary, and by retirement in your 60’s 7 times salary.

Back to video.

Once you’ve taken care of your regular bills and savings, you have a bit more flexibility with what’s left.

But if you find yourself overspending from month to month, you might want to try tracking your spending.

One simple way of doing this is using the “envelope method.” While it might sound old-fashioned, putting a set amount of cash in envelopes each month for different purposes like groceries, transportation, dining out, and just general spending money can help you set limits on what you spend. So then, if you find yourself spending more than you had available in any of your envelopes, you might need to make adjustments the following month.

Another way you can keep track of your spending with little effort is to use a single debit or credit card that can track and categorize your expenses for you.

By keeping all of your purchases on one card, you’ll only have one monthly statement that shows how much you’ve spent and where you spent it.

So it can be easier to see where you might be overspending

and how you might cut back.

Plus many banks now have online tools that can categorize your spending for you, so you’ll be able to get an idea of what you spent on different things like entertainment, groceries or dining out. Many banks also offer account alerts that will let you know when you’ve reached certain spending limits.

If using a single card is too limiting, money management software or apps can help you link all of your accounts and automatically track your spending and saving for you.

Many of these have even more detailed tools to help you analyze your spending and they also have alerts that can warn you if you might be overspending in one category.

And finally, if you feel like setting limits on your spending is a challenge, consider making one of your goals a small reward to yourself. Whether it’s a treat at the end of a long week or putting aside a little extra toward a large purchase you really want, rewarding yourself might help you feel more motivated about managing your money—as long as it doesn’t push you into overspending.

12:15 Bonus Feature Content – Tips for impulse buys

Make a shopping list. Before you go to the store, make a shopping list and stick to it.

Beware of sales. Discounted items can seem like an opportunity, but it could be an opportunity to buy something you wouldn’t normally buy.

48-hour rule. If you see something you want to buy, especially something that is a bit more expensive, try waiting 48 hours. Then, see if you still want it. If you do, it might be something you will use, and you’ll know your decision wasn’t impulsive.

How many hours of work does it cost? Before you buy something you want, think about how many hours you’d have to work to cover the cost. Is it still worth it?

Avoid saving credit card info online. Storing your credit card or debit card info in online store accounts can make buying easy – maybe too easy. If you have to enter your card info each time you purchase something, you’re more likely to think about whether the purchase is really worth it.

If you get to the end of the month and still aren’t sure where your money is going, take a look at your statements and see if there are costs you didn’t realize you owe: subscriptions to magazines you don’t read, or memberships to services like gyms or cable packages that you don’t use. Cancelling those could save you a lot in the long run.

Back to video.

While a detailed budget can be a great motivational tool to help you cut costs and reach your savings goals, it’s not the only answer.

As long as you pay attention to the basics…

[visual of 3 basic goals:
Cover basic needs
Manage debts and savings
Avoid overspending]

make sure your needs are covered; manage your debts and savings; and avoid overspending, you will be setting the groundwork for a more secure financial future.

Bonus Feature Content: Key Takeaways

Know your baseline. Figure out what you need each month to cover your necessities.

Automate your payments. Set up automatic bill pay or bill pay calendar alerts so your bills get paid on time.

Pay yourself. Build your savings with regular contributions to your emergency fund savings, retirement accounts, and other short or long-term goals.

Track your spending. If you want to know where your money is going, you can try one of these:

The envelop method. Putting a set amount of money into envelopes for certain spending categories can help you stick to a budget.
The one-card method. Using one card for all of your purchases keeps your expenses on one statement.
Personal finance apps. There are tools and apps that can help you keep track of your spending and saving.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.

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