Some lessons in life are learned the hard way, and financial mistakes are no exception. “Budgeting is an art, not a science,” says Brittany Turner, a CPA and the founder of Countless. “Like any other relationship in our lives, our relationship with our finances will blossom when we spend more time with it.”
Luckily, with patience, time, and a lot of practice, Turner says anyone can master the art of saving — and potentially, growing — their money. “The most important thing is to just start, because the longer you are budgeting and tracking your expenses, the easier it will become to see patterns and make changes,” she says.
Curious what kind of rookie mistakes accountants and financial advisors made when they first entered the money game? From saving money for retirement to breaking down big financial goals into bite-sized tasks and more, here are six valuable budgeting lessons that money experts say they wish they’d known sooner.
If he could go back in time, accountant Aaron Smyle of Smyle & Associates says he would have started setting money aside for his savings account sooner. “Starting to save early means you can exploit the power of compound interest,” he explains. “Even if you don’t have enough funds to put towards savings every month, you can save any yearly bonuses and tax returns so they’ll begin to accumulate interest without decreasing your disposable income.”
The same goes for Turner, who says she wishes she’d started saving for retirement when she was 19. “Even if I had just set aside $15 a month back then, and followed-through with it consistently, it would’ve really helped my journey to retirement,” she explains. “If you haven’t started yet, consider setting up contributions on autopay — even if it’s just $15 a month — your future self will thank you.”
No matter your income, Aaron Bell, a wealth management advisor with Northwestern Mutual’s Private Client Group, Cannataro Family Capital Partners, says the sooner you create and stick to a monthly budget, the better. “From providing a sense of how much money is coming in and going out each month, to helping you achieve your financial goals — like saving for a car or a big trip — a budget touches so many aspects of your life,” he explains.
Since your income and money goals can change over time, Bell says your budget should too. “One of the first steps to creating a budget is taking a look at recent debit and credit card statements to get a strong sense of where your money actually goes,” he explains. “By taking a hard look at your ‘flexible spending’ expenses and finding where you can save, you may free up some room in your budget with little to no lifestyle change.”
Break down big financial goals into bite-sized tasks.
Not only will turning your long-term financial goals into specific, actionable steps make them easier to tackle, Smyle says doing so can help you stay motivated along the way. “Visualizing your future life and actually creating tangible goals is one way of making them more ‘real,’” he explains. “Creating big, ambitious goals is fine, but breaking them down into smaller, attainable, and noticeable goals will help you stay on track.”
If you’re struggling to break down a big-picture money goal into smaller, actionable tasks, Smyle says defining your financial objective is a great place to start. “Name your financial goals and if possible, rename your savings or investment account accordingly (i.e. ‘house deposit’ or ‘new car’),” he advises. “This makes it easier to visualize what the money’s for, and resist the temptation to withdraw those funds for anything else.”
When it comes to designing a monthly budget you can stick to, Turner says it’s every bit as important to set funds aside for your long-term financial goals as it is to pay your bills on time. “I wish I’d known to pay myself first ten years ago,” she says. “The simple act of making that transfer or allocation towards your future before anything or anyone else is powerful, helps make sure that you’re working towards your long-term goals.”
To ensure you’re putting money towards future goals every month, Smyle recommends setting up automatic monthly deposits into your savings account. “If the money comes out of your checking account before you see it, you’re less likely to spend it,” he explains.
Only spend money on what you really need.
Instead of focusing solely on budgeting, Bell says he wishes he’d looked for ways to eliminate nonessential spending when he was younger. “There’s a big difference between what you want and what you actually need,” he explains. “For example, if you move into a new place, acquire things slowly rather than designing your whole apartment right away only to change your mind later (and lose money in the long run).”
If you’re struggling to identify what purchases should be deemed obligatory, certified financial planner Kristen Euretig of Brooklyn Plans recommends dividing up your monthly expenses into three sections: Commitments, Goals, and Choices. “A lot of people conceive of obligatory spending as ‘needs’ but when you separate the money that has already been committed (like rent, utilities, and cellphone bills) you’ll have a clearer picture of what funds are truly essential — and which you may need to save up for,” she says.
Some monthly expenses are negotiable.
Believe it or not, Turner says she would have saved a lot more money earlier in life if she’d only known that seemingly fixed bills and interest rates were negotiable. “You’ll never know if you can get a discount on something unless you ask and it doesn’t hurt to ask,” she explains. “Credit card interest rates? Cell phone bill? Utilities? Yup. They will likely lower the rates if you ask.”
If you don’t want to negotiate yourself, you can always pay someone to do it for you. Apps like BillShark, Trim, and True Bill analyze transactions linked to your checking and bank accounts and will negotiate lower rates with providers on almost any recurring bill, including cable, internet, and phone plans, for a monthly fee.