Assistant professor shares simple steps to setting up a budget you can stick to

April is National Financial Literacy Month
Published: Apr. 14, 2021 at 1:31 PM EDT
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SAVANNAH, Ga. (WTOC) - April is National Financial Literacy Month. Budgeting is a crucial component of financial wellness, but sometimes it can seem difficult.

Doctor Katie Pham is an assistant finance professor at Georgia Southern University. She said while you may think of budgeting as a chore, it’s actually a habit that can relieve stress.

“Something as small as, ‘Oh, wait a minute, I forgot to pay my bills. Oh my God, you know, I forgot to pay my mortgage, or I forgot to pay my rent. All of these little panic moments kind of actually incentivize people. "

She said it’s easy to get lost in the weeds of the budgeting process, so start off simple.

“I would encourage everyone to do a basic understanding of your own spending first.”

Understand your spending habits by looking at a month’s worth of bills, preferably in paper form. Then, split them into physical bins based on how they were spent.

You can keep these types of spending pretty broad. Doctor Pham suggested these four categories:

  1. Basic needs: These are costs like your rent or mortgage, groceries, and gas that you know you’ll have to pay every month.
  2. Unavoidable spending: “That would be something I can foresee that I’m going to have to spend some money by fixing the car or fixing the house,” Dr. Pham said. “Not something that’s immediately needed, but something that in everyday life you can see that, ‘Oh, this is an issue that I’m going to have to address soon.’”
  3. Wants or spending goals: This can include unnecessary spending, or a spending goal, like a nice piece of jewelry.
  4. Saving and investing: Doctor Pham said this should be a fixed rate of at least 10% of your monthly income.

“Once you’ve accumulated a certain amount in that account, you can start thinking about what you want to do with those. Do you want to invest in stocks? Do you want to invest in real estate, purchase some properties?”

Doctor Pham suggested budgeting at the same time as a close friend or budgeting with a spouse to help keep you both accountable to your financial goals. Also, give yourself some wiggle room in your budget.

“It doesn’t make sense to do, ‘This gas station is $2.60, the other is $2.65. You don’t have to go five miles to save five cents.”

At the end of the day, she said, it’s all about finding a way to make the most of your earnings.

“You don’t necessarily have to have all the wealth in the world, but you can work with what you’re having right now to build a better future.”

Once you’ve set a budget that works for you, Doctor Pham suggests revisiting it once a year or anytime you think a large purchase may be coming up.

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