Budgeting might not sound like your idea of a fun time, but it’s a sound strategy for getting more out of your money. If you want to stop wasting your cash and start saving more for the things that matter, then budgeting is a great way to get started. The only trouble is that most people don’t know how to create a budget, to begin with.
There are reasons why personal budgets often fail. I wrote about it in the past. Considers not doing the common mistakes people often do. cause once or twice your budget fails and are demotivated to follow it all together. As the budget is the most effective tool for having your finances in order. We write about it very often.
To help you become the savvy spender that you know you can be, we’ve put together some useful insider tips to help with your budgeting goals.
1. Start Early and Budget to Zero
A great budget starts with a focus on the future. You need to plan to make sure that you’re not struggling to catch up with the overspending you might have done the month before.
At the end of each month, sit back and look back over your spending from the previous few weeks, then plan what you’re going to do in the month ahead.
Ideally, you’ll need to budget to zero. This means that every dollar gets a purpose. If you make $3000 in a month, then you need to know exactly how you’re going to use or save the entire amount. This will make it easier to account for every penny.
2. Track Your Expenses
Few things in life stay the same for long. To make sure that you’re not overspending in many areas, you’ll need to track your spending on a day to day basis.
If you don’t like doing this by hand, there are apps you can download to your smartphone that will track your expenses for you. You will need to connect them to your bank account though and make notes when you spend money in cash.
As you learn more by tracking your expenses, you’ll be able to make informed changes to your budget.
For instance, if you discover that you over-spend on clothes each month, you could put additional restrictions in space to make sure that you cut down.
3. Compare Every Cost
A lot of people assume that if they want to budget correctly, they’ll need to cut all of the things they enjoy out of their schedule, like going to the movies or eating at restaurants.
However, before you start cutting things out, make sure that you’re not spending more than you need to on your regular expenses.
Go online and check that you’re getting the lowest possible prices for things like your car and health insurance. Make sure that you can’t reduce your energy bills by switching to a different supplier.
Don’t forget to compare your loan options too. Just like any other product, loans come in many different shapes and sizes, and you’ll need to make sure you’re getting the one with the best interest rate.
4. Have a Savings Fund and an Emergency Fund
One common mistake that people make with budgeting is that they bundle all of their leftover cash into the same “savings” fund.
While that might seem like a good idea at first, it also means that when something goes wrong, you need to take all of your cash instantly out of your savings fund.
To make sure that you can leave your savings completely untouched, have both an emergency and a savings fund instead.
This way, you won’t be pulling money out of your savings account when things go wrong, and you’re less likely to feel demotivated or just give up on your savings goals.
Speaking of goals, make sure that you set some for your savings too. This should help you to avoid spending the extra money you have when you feel tempted.
5. Be Realistic
It’s much harder to budget when you try to hold yourself to impossible standards. While you need to be strict with your spending habits to make sure that you don’t over-spend on the things you don’t want or need, you also need to remember that you’re human.
With that in mind, don’t take all of the fun out of your budget straight away. There are budget-friendly fun ideas that you can explore. Without fun, your budget is meant for failure!
Leave some extra room aside in your regular spending strategy to make sure that you’ve got cash for things like a night out with your friends every once in a while.
This will help you to avoid falling off the wagon because you feel too restricted by your budget. Make sure you create a “miscellaneous” fund in your budget too, for the things that you forget to plan for the month before.