So you’ve finally bought your new home. In a competitive market, this is exciting! Now you have to conquer that pesky mortgage, though.
Some people end up paying their mortgages for the rest of their lives (or at least until they decide to move again), but if you’re able to, paying off the mortgage as early as possible is the way to go.
While it might seem impossible, smart budgeting might be the key to freeing you from the bank.
You’re a smart homebuyer, right? You want to make your mortgage shrink as fast as possible, and that means you’re willing to make a few adjustments and cut monthly expenses.
If that’s true, we have a few tips for you. Keep reading to learn how you can create a smart budgeting plan to start paying off your debt.
Log Your Spending
Before you’re able to plan your budget, you need to determine how much you spend in an average month. This includes bills, groceries, any “fun” expenditures, and anything else that’s a routine part of your spending schedule.
Don’t change anything for that month. You want to establish a baseline that you can make adjustments to when you start modifying your budget.
Write down all of your expenses and keep receipts if you’re able to. There are several apps available that can help you keep track of everything.
Compare Current Expenses and Earnings
Once you’re ready to start creating a good budget, you start looking at what you have to work with.
First, look at how much your household earns per month. If you have multiple incomes, combine them. This is going to be the base and everything else in the planning session is going to be subtracted from it.
Then, look at your normal expenses. You’ve already tracked them in the first step, so this should be easy.
Take those expenses out of your income and see what you have leftover. How much more of that can you allocate to larger mortgage payments and how much needs to go into your savings? Do you even have anything leftover? You might be able to talk to your mortgage brokers, like Hunter Galloway mortgage brokers, to determine if you can increase your mortgage.
If you’re like many people, you may discover that you’ve spent the bulk of your money by the time that the month is over. This is when you can start figuring out where you can cut corners.
Determine Obvious Cuts
There are some things that will be obvious once you see them laid out on paper. Have you discovered that you’re still paying for memberships and subscriptions that you don’t use? Do you do a lot of mindless online shopping?
Cut out anything that isn’t serving you. You might be surprised at some of the things that you’re paying for that you don’t even use.
Evaluate “Wants” and “Needs”
Once you’ve made obvious adjustments, it’s time to figure out which things you “need” and which things you “want.” When you want something, it doesn’t mean that you can’t keep it in your budget. It just means that it may require extra evaluation or that you should allocate less money towards it.
Your required expenses will go in the “needs” category. We’ll talk more about how you might be able to reduce those costs later on. Your “wants” will include things that you still use (unlike the obvious cuts) but might be able to go on hold until future notice.
For example, do you tend to spend a lot of money on new clothes that you don’t need? Do you go out and do expensive activities from time to time, or eat takeout food too often?
You don’t have to stop these things. Just take note of them.
Reduce Grocery Costs
You need to buy groceries, but that doesn’t mean that you can’t reduce your costs. Many people overspend on groceries, especially if they’ve never been in a position where they need to cut corners before.
We already talked about “wants” vs “needs,” and this applies to groceries as well. Do you buy too many snacks? Do you end up overspending because you buy pre-packaged meals or small portions instead of bulk?
Buying in bulk is a great way to save money if you have a large family. You should also start looking into meal planning and making bulk meals.
After this, start buying a few items that are store brand instead of name brand. They’re more affordable and they’re often almost identical.
Finally, sign up for loyalty programs. These programs often give you access to huge discounts. If you have loyalty programs at several local grocery stores, look at each one before deciding where you’re going to shop that week. It’s possible that one will have better deals than the other.
Look for Affordable Alternatives
There are other places where you may be able to find alternatives aside from when you’re grocery shopping.
Look at your memberships and subscriptions that you need to keep around. If you’re a gymgoer, are there cheaper gyms somewhere nearby? If you subscribe to a fitness video program, is it better than free alternatives?
What about meal or produce boxes? While some are more affordable than cooking or buying from the grocery store, you can often price shop for better options.
Finally, look at your insurance and internet providers. For the internet, sometimes you can lower your bill by negotiating. For insurance, look around for cheaper options and see what’s available, if anything.
Smart Budgeting: Difficult but Worthwhile
Learning a few smart budgeting techniques can save you hundreds of dollars per month if you’re lucky. Whether you put this money into your savings account or you use it to contribute to your mortgage, you’ll be on your way to greater financial freedom in no time.
Personal budgeting takes some planning, but it’s easy once you’ve adapted. Get started today!
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