Are you interested in buying a house, but feel like you are nowhere close to being able to afford one? Well, it may be the case that you feel like your finances are not in control, and you don't know where your money goes. In this short post, I'm going to talk about how budgeting can help you with these goals. This is nothing earth shattering for sure, but I often find that very few people actual make and then stick to a budget.
The Importance of Making Your Budget
First, and maybe most importantly, budgeting helps you know exactly where you money is / goes at any point in time. Do you know how much your eating out habit costs? Are you aware of how much money you spend on new clothes each month? If you don't know where your money goes, then you won't have a clear idea on how you need to even change your spending habits to meet your financial goals.
Next Steps After Starting Your Budget
Once your budget is created, you're then able to make an action plan to reduce spending and increase savings in the appropriate areas. This is a good time to ask yourselves questions like: "What am I spending on that makes me happy"? What am I spending money on that I hate?" What do I have the power to control in changing my spending habits today?" Now, of course you probably can't (immediately) change your rent or your car note, but perhaps those are items that you might consider taking a look at as you make changes to your financial situation.
Sticking to Your New Budget
You now have your budget set up and your action plan for changing your spending habits, now it's time to figure out how you actually stick to that new budget. My first tip for sticking to a new budget is trully evaluating where your spending issues are. Once you know that, I recommend monitoring your spending habits on those areas daily. For example, if you buy every beautiful new pair of shoes that you see, you need to start tracking it. Tracking will help you see your values totaling up, and make you more likely not to spend more there.
If that is not enough for you, I'd also recommend that you set a timeframe from identifying a purchase that you want to make to actually making that purchase. A good place to start would be setting up a 3 day hold period. If the purchase still seems like a good idea after those days, then you can allow yourself to make it, as long as you stay on budget.
Another good rule of thumb is to set "spending stops" when things start getting out of control. A good example of this would be that if you target spending $150 each month on eating out, once that amount is reached, then you move to cooking at home / bringing food to lunch.
Wrapping Things Up
I hope that you can see how budgeting can be a jumping point to helping you reach any large purchases you intend to make, including buying your first (or your next) house. If you want to learn more about budgeting and download a free budgeting guide, head over to my post on the 50/30/20 Budget Method.