Keeping a household budget seems pretty straightforward — so why do we have so much trouble sticking to it? One trick you can try to help is to think of yourself as a business. Businesses have expenses and money coming in and focus on that bottom line. They also can use profits to re-invest in making the business better. Check out the following tips to try budgeting like a business.
Track the Basics
It’s important to remember the importance of keeping an inventory and tracking where your money is going. Businesses keep a close eye on where the money is coming from, how it is being spent and when all transactions occur. It’s a good idea to do the same in your household budget. This way you can identify where you might be overspending and where you can cut back.
Use Credit Wisely
Businesses borrow money, but before they do they search for the best rates. Households can follow a similar principle by finding the lowest-interest-rate credit cards. If you routinely pay your balances each month, you can use cards that have travel rewards points or cash back. When using this strategy, it’s important to pay off your statements in in full and on time so you do not face interest charges. By using cards smartly, you can earn a little extra without having to pay more. And you may even save yourself money in the long run by improving your credit score and decreasing your lifetime cost of debt. (You can check your credit scores for free every month on Credit.com to track your progress.)
Analyze, Prepare & Adjust
Most businesses make an effort to ensure they aren’t paying more for services than they need to, and you can do the same thing. Observe how you spend your money and hunt for the best deals for your important expenses. This can include making sure you have the best interest rate on your mortgage. You can investigate if you can get a better rate if you refinance. This can help you save in the long run from paying unnecessary interest. You can also make sure you aren’t paying extra fees with your bank, your cable company or any other companies you regularly use.
Keep a Reserve Fund
Most successful businesses have a reserve fund that helps them in case of a change in economic climate. Similarly, it’s a good idea to keep a household emergency fund for unexpected costs or changes you may face in the future.
Running your personal or family budget the same way as a business focused on the bottom line can help ensure you come up in the black. You may not be able to charge or write off expenses. But you will get a better handle on reality and, with the right attitude, may experience smoother financial transactions.
AJ Smith is an award-winning journalist with more than a decade of experience in television, radio, newspapers, magazines and online content. She currently serves as the managing editor for SmartAsset. AJ has a passion for meeting new people, sharing stories and helping others. She has degrees from Princeton University and Mississippi State University. AJ and her husband also write and illustrate educational children’s books. More by AJ Smith