Creating a budget and working around it is not for everyone, especially in this crippling economy we currently live in. But a budget might be what everyone needs to be able to survive and be financially content from month to month.
In simple terms, a budget is a spending plan that one can create to determine in advance if they will have enough money to cater to all their needs. It allows one to prioritise their spending and focus mainly on things that are necessary and much needed.
It is all about balancing your expenses with your income.
Following a budget plan can help you stay out of debt or help you work your way out of debt if you are currently in debt.
If you didn’t have a budget plan, then this is the perfect time to start working on it and manage your money better.
In this article, we offer tips on how you can get started with budgeting your money and how you can budget.
1. Record your income
Depending on how often you get paid, it can be weekly fortnightly, monthly, or yearly it is very important to record how much money comes in and when.
If you do not have a regular amount of income, then you can just work out an average and record that.
Make note of how much money you get, where you get it from, and how often. This can be money from your wages, pension, benefits, side hustles, or income from investments.
Having a clear indication of how much money you have coming in will give you a better and great idea of how to go about with your budget plan.
2. Have a list of your expenses
Knowing how to prioritise your needs will help you manage your finances and allow you to stick to your set budget easily.
On your list, start with the most important things first. This should include food, accommodation, utilities, transport, and most importantly how much you are putting away into your savings account.
You can fill in the rest of the things you would like to do once your necessities are taken care of.
3. Do the maths
Now, this is where it gets tricky as you get to subtract your expenses from your income.
Regardless, this task will help you to see if you will be left with a negative balance or if you will have extra money to spare.
If you are left with a negative, then maybe you should start thinking of taking out extra jobs or side hustles that can bring in extra money that will be able to cover all your monthly costs.
4. Track your spending
Forget the old way of noting down every expense and allowing technology to come to the rescue. You can track your spending electronically using the single-card method.
You will be using one debit or credit card for all your purchases. This will also eliminate the need to always have cash on you.
The best thing about all of this is that you will have easy access and all records of your spending.
5. Set up your budget before the month starts
Before the month even start, have a financial plan for it. You will be applying the zero-based budget method which allows you to justify all your expenses for a new period.
This budget is built around what is needed for the upcoming month.
This will be much easier to tackle if you already have a record of how much money will be coming in that month.
1. Pay off your debt
If you have existing debt, paying it off should be your top priority. And yes, it is possible for you to pay off your debt while broke or working on a tight budget.
Work on your budget with your debt in mind. If it means cutting certain costs just so you can cater to your needs and pay off your debt at the same time, then so be it.
Your financial freedom depends on you – sacrifices will have to be made.
2. Trim your budget
If necessary, don’t be afraid to cut off a few things that you used to do. This can be limiting takeaways for home-cooked meals, shopping less, and cutting off some extra activities.
This can be a temporary move; adjustments can be made at a later stage.
3. Limit your credit card usage
If you are committed to your budget, then using less of your credit card or cutting it off completely should be one of your most important things to consider.
This way, you will be staying away from high-interest fees and debt, allowing yourself to survive within your means.
4. Try online budgeting tools
There are several applications such as iSaveMoney that you can download and use to create your budget, organise your budget and track your expenses.
These applications allow you to focus on planning a budget and tracking your spending from the comfort of your smartphone.
5. Every month will be different
Remember, every month will be different. Some months you will have to budget for things like car service or maintenance or back-to-school supplies, others you will be saving for birthdays and vacations.
No matter the occasion, you will have to include all those expenses into your budget plan.
Don’t forget that Christmas hasn’t changed, it is still in December, so avoid the Christmas unexpected expenditure and budget for it in time, this will also help you to manage your holiday spending better.
With the difference in months, remember to adjust your budget to suit each change. A savings account might be what you need for your unexpected expenses.
No pressure, be lenient with yourself. Give yourself lots of grace as this won’t be an easy task to incorporate into your daily life but, it is something that with consistency you will get used to and will stick to it after noticing the positive outcome of budgeting your money.