Having a effective budget and sticking to it helps you organize your finances and ensure an adequate amount of money goes toward your bills, savings, and investments. It also builds good financial habits that will increase your credit score over time.
However, following a budget has become increasingly difficult, and 83 percent of Americans who have a budget say rising costs are the biggest challenge they face when trying to stick to it, according to a recent survey by WalletHub, a personal finance website.
To see where Americans have the best budgeting skills and where they are in need of the most improvement, WalletHub compared the 50 states across 12 metrics, ranging from the average credit score to debt-to-income ratios to foreclosure rates.
“Not having a budget sets you up for financial failure,” Chip Lupo, WalletHub analyst, said in a report on the survey. “If you don’t carefully plan out and track how much of your income you can dedicate toward each of your expenses and other financial priorities each month, it’s easy for frivolous spending to get out of hand and prevent you from saving money, investing or even keeping up with your bills.”
Lupo said it’s unfortunately that many people weren’t taught how to budget and suggests that states should strongly consider requiring classes on budgeting in schools.
The states best at budgeting:
1.Massachusetts
2. Washington
3. Hawaii
4. Vermont
5. New Hampshire
6. Wisconsin
7. Minnesota
8. Connecticut
9. New York
10. New Jersey
The states worst at budgeting:
41.New Mexico
42. West Virginia
43. Nevada
44. South Carolina
45. Oklahoma
46. Georgia
47. Alabama
48. Arkansas
49. Louisiana
50. Mississippi
The most effective way to budget is to find a budgeting method that works for you, said Beth Hunsaker, associate director of the Financial Wellness Center and associate instructor of family and consumer studies at the University of Utah. Some examples Hunsaker points to are:
- Phone apps are great to connect to your banking and credit cards accounts to have up-to-date numbers on all of your finances. This can be a good strategy for people who want a quick and easy way to budget or have multiple accounts. Keep in mind these apps will have a cost, either money up front or a subscription.
- Spreadsheets are a great strategy and are very easy to personalize to your needs. These offer great ways to incorporate your goals. They do take more work since you would need to update the numbers yourself. These can be great for people who like a hands-on approach and like to look for long term patterns to maximize their finances.
- Planners and other physical tools are old school methods that can be the way to go. Having a place to write things down can be a quick and efficient way to keep track of finances. Cheaper than some apps and easier to update than a spreadsheet, this can be a good way to stay on top of finances for those who like to keep it simple.
The best way to make a budget stick is to approach it from a positive mindset, she said.
“If you are thinking that a budget is restrictive or it is a punishment, then it will be hard to stick to,” she said. “But if you approach it from a place of self-care and future growth it is easier. Think of it as planning where you want your money to go instead of wondering where your money went.”
