Many people view budgeting as a painful process, but most will also admit that it is a necessary evil. The most challenging part of a budget is sticking to it, not so much the planning and developing of the budget itself. Here are ten budgeting tips that can help you secure your financial future.
1. Keep It Simple
Budgets do not have to be overly complicated in order to be a successful debt management tool. Record spending habits, expenses, and income. You can use one of the many software programs available or you can use pen and paper.
Pick the one you feel most comfortable with and save your frustration for when you realize you can’t buy those new shoes or tools rather than on the software program you can’t figure out how to use.
(Related – Why Do Personal Budgets Often Fail?)
2. Use as Accurate Figures as You Can
Try to plan out your budget for one year, including anticipated expenses like car maintenance, property taxes or home repairs that may only happen once or twice a year. Try to project expenses as accurately as possible. This will allow you to adjust your budget as necessary. Once that is completed, prioritize your bills and expenses.
If you are in the UK and want to be in the market for a new home, you need to factor that in your budget before hand. There are various Emortgage calculators available that can help you achieve that.
3. Include Financial Goals
Whether your goal is to go on your dream vacation, buy a new car or pay off old debt, include it in your budget and a plan to save for it. It can be helpful to create a secondary savings account that is used solely for savings related to your goal.
You can then determine how much you can afford to put aside towards your goal out of every paycheck.
4. Include an Emergency Plan
You should also include a plan of action in case you ever lose your job, your family is reduced to a single income or an unexpected bill occurs. Set aside money each month that is used for emergency purposes only. It is essential you build a buffer for emergencies into your budget.
5. Categorize Expenditures
It can be helpful to divide your expenses into two separate categories. One category is for your fixed expenses, ones that you can anticipate every month, that have to be paid and usually have the same amount due every month.
Some examples would be your mortgage or rent payment, car payment or insurance. The second category would be variable expenses that may change month to months such as cell phone bills, cable, the internet, utility bills and you should also include expenses like clothing, gifts, groceries and credit card payments.
6. Look for Possible Cuts
Once you have your expenses categorized, you can go through and look for ways to cut back on spending in order to increase the money you put towards your financial goals and to you your emergency fund. Read what is an emergency fund and why we need it.
There are many ways in which you can cut spending when you really sit down and look such as switching to a cheaper cell phone plan, bundling your cable, the internet, and phone package, turning the cable off altogether in exchange for watching movies or TV shows online or see in if you qualify for better interest rates on any loans.
7. Settle Old Debts
One item that should always be included in your budget is all debt that you owe and a game plan for paying off your old debts. Debt settlement may be something you want to consider as a legal way of reducing your debt. Debt settlement can help you avoid bankruptcy and pay off your debts faster.
8. Keep a Cash Spending Record
Carry a small notebook with you and write down every time you spend cash, even down to the candy bar you had after work. Keep this journal for thirty days and you may be surprised at how much you nickel and dime yourself each month.
9. Determine if Loan Programs are Right for You
Whether you are overwhelmed by credit card debt, student loans or medical bills, there are many loan consolidation programs available that can allow you to pay one monthly payment in exchange for multiple payments.
10. Keep a Good Attitude
Keep your attitude focused on the positive. Rather than looking at budgeting as a chore, look at as a way of getting a handle on your finances and a way to secure you and your family’s future.