Tactical budgeting, more commonly known as strategic budgeting, is an advanced form of financial planning. Businesses around the world use it to allocate funds to achieve the most optimal returns and meet targets.
It does not take a financial expert to do tactical budgeting for your home or family. This is how you can do it at home to achieve your long- and short-term financial goals.
You first need to do is gather all your financial documents and statements to get a comprehensive idea of your financial situation. You want to use this information to learn exactly how much money you make and how much you have in savings, debts, and investments.
Try to get the most accurate estimates of your monthly income and expenses. Naturally, you want the former to exceed the latter. Iif your monthly expenses are greater than your monthly income, your finances need some serious tactical budgeting, and you should closely follow this guide.
Review All Your Expenses
All of your expenses can be broadly categorized into 2 main subtypes, fixed and variable expenses. Fixed expenses include expenses that typically remain constant for months, like your car payments, mortgage, insurance payments, or rent. On the other hand, variable expenses keep changing from month to month, like the money you spend on food, groceries, fuel, or entertainment.
You want to review both these expenses closely and flag the ones you can reduce or eliminate completely. We recommend maintaining a physical budget binder or a digital spreadsheet to make things easier and keep yourself organized.
Set Targets Or Goals
Strategic planning is key to tactical budgeting, and this means determining long- and short-term targets or goals for your finances. Your goals can be a big purchase, paying off a student loan, saving for retirement, funding a vacation, or sending your kid to college. Take your time and prioritize both long- and short-term goals because these goals will determine how you budget your finances.
Adjust Your Finances To Meet Your Goals
Budgeting is not rocket science, and anyone can do it. Let’s say a certain goal requires $1,000. You need to find a way to either save $1,000 or earn it. You can achieve or expedite both by increasing your income or reducing your expenses.
The latter is more realistic because increasing your income isn’t always easy or even possible for most people. Try to cut expenses on things you don’t need. Entertainment is perhaps the easiest category. Look for subscriptions like cable, streaming, or gaming that you can live without.
Consider giving up habits and luxuries like smoking, drinking, or dining out too much. Another way is to find cheaper providers and services for things like the Internet, insurance, etc. Look for creative ways you can cut down costs.
Pay Off Your Debts
Once you adjust your finances, you are likely to end up with some extra cash. The best strategy is to use this money to pay off your existing debts. The sooner you can pay your debts, the sooner you can free up more money for savings and goals. Paying off your debts also means that you save money on interest paid overtime.
Allocate Excess Funds
If you are debt-free or if your goals hold priority overpaying off your debts, you need to allocate the excess funds you have. You can put that money into a high-yield savings account or invest it in low-risk investments. Remember to consider all your options, do thorough research, and assess all the associated risks before you invest your money.
You can use our guide to apply tactical budgeting to your personal finances. It helps to get everyone in your household on board. Share your goals with them and explain how you plan to achieve those goals. Working together with your partner, parents, or kids can be very encouraging and helpful to achieve both your long- and short-term goals faster.