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Five Budgeting Tips to Help You Achieve Financial Success

If you have difficulty managing your money, or avoid financial planning altogether, you’re not alone. Many struggle with the financial terminology, long-term planning, and continued discipline that can make planning your finances a daunting task. Here are five tips you can use to help you make the task of budgeting easier.
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Start Early
Wondering when the right time is to start getting serious about money management? The sooner, the better. Getting a basic understanding of how personal finances work in high school is ideal, but if that wasn’t part of your family’s discussions or school’s curriculum, you can still have a solid starting point. “Starting at any age, my first tip would be to learn the financial terminology,” says Peg Webb, senior vice president at Wealth Enhancement Group in Minneapolis. “If you learn the terminology, you won’t be as intimidated to move forward.” For instance, when applying for your first car or home loan, it would be helpful to know phrases such as "term" (how long the loan lasts), "APR" (Annual Percentage Rate—how much interest you pay the lender each year to borrow their money), or PMI (Private Mortgage Insurance—required on home loans where the borrower has put less than 20 percent down). There are many good Websites that explain financial terms—some are very technical—but we think the following sites are great for those just starting to get their financial bearings: Life Smarts – Personal Finance Glossary and MoneyRules 101 Financial Terms.


Set Time Frames
No matter what your financial situation is, in order to create a plan that makes sense for you, the first step is deciding what is most important to you. Do you want to buy a house? Pay off student loans? Set aside money for retirement? Think about what’s important to you. Once you determine your major goals, assign a deadline. “Whether you’re 20, 30, 40, 50 or 60, you need to set time frames,” says Webb. Think ahead five years, 10 years—even 15 years down the road. What do you want to accomplish within those time spans? Decide that, says Webb, and you can give a purpose to your money, which can make it easier to save.


Live Within Your Means
Financial success can often be determined by the steps you take while you’re still young. “The most successful people that I’ve seen are debt-free, and they live within their means,” says Webb. While it can be difficult to avoid spending temptations, particularly when saving goals are far-off, taking little steps now can pay off in the end. At Wealth Enhancement Group, employees try to help their clients establish a balance. “The big question is do you live for today, or do you live for tomorrow? Our answer is, you do some of both,” says Webb. “You create that discipline of saving consistently for yourself first, and then take advantage of the life that you have today.” One great way to achieve the goal of living within your means is to have money automatically deducted from each paycheck and sent straight into an IRA or savings account. This will help you save for the future because the money won’t be in your checking or debit account–out of sight, out of mind can benefit your future.


Be Debt Free
If you find yourself in debt, the best move is to modify your budget and get your debt paid off as soon as you can. Paying a little extra with each debt payment can make a big difference over time, and you can be rid of debt much sooner. If you have to accumulate debt, make sure it's what Webb calls "efficient debt." Things like student loans and mortgages are efficient because your money is still working towards something. You are gaining an asset, and "you really determine what you want to do with that asset," says Webb. 


Embrace Youth as a Saving Opportunity
When you start saving early (even if it’s just a small amount) that money will accumulate to be a great financial foundation over time. “Even if you start small, with the power of compounding at a young age, you may outpace people that are decades older than you," says Webb. "So start earlier.” Seeing the advantage that you have as a young person to start saving is very important. Even if you don't have tons of money to spare, you do have something that older people don’t have—time. “I look at a 22 year old and say ‘you’re rich,’ not the 80 year old that has all the money," says Webb. Bottom line? Start saving and investing today, and you’re ensuring yourself a better future.

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