We all know that we should have a good budget to help us spend more and save less, but creating a budget and figuring out how to actually stick to it isn’t always as easy as it might seem. Ultimately, a lot of people end up giving up on their budget only a couple of weeks after they’ve set it down on paper, and that means that you end up convincing yourself that budgeting simply doesn’t work.
The truth is that a good budget really could give you the financial freedom you’ve been looking for, and make it easier for you to achieve your cash goals. All you need to do is figure out how to get started the right way. The following tips could help you to accomplish your money-based ambitions faster, and make budgeting less of a chore.
1. Know Why You’re Budgeting
Budgeting works best when it’s tied to a specific goal. Ultimately, no-one just wants to watch every penny that they spend – they want to know that the money they’re saving is eventually going to help them accomplish something.
Ideally, you should be setting both short and long-term goals for your budgeting habits. For instance, you might want to save some cash to go on a vacation next year, and that could be your goal to start with, but ultimately, you might want to buy a new house or get yourself out of debt for good.
2. Know Exactly How Much You Spend
It’s impossible to create a successful budget if you don’t know for sure how much you’re spending, to begin with. A good strategy to start with is tracking your spending for an entire week – writing down everything from your morning coffee, from the newspaper you buy on your way home from work. Keeping track of all your spending like this should be eye-opening, and help you to pinpoint areas of expense that typically go unnoticed.
Once you have a general idea of where you’re spending your cash, and how much you generally spend, you’ll be able to make some significant changes.
3. Make Adjustments
While the key to a great budget is sticking to your restrictions, it’s important to remember that you will need to make adjustments from time to time. After all, we can’t prepare for everything that might happen in life, and the chances are that your budget won’t have a slot allocated to when your washing machine breaks or you suddenly remember that you need to go to a work dinner. Make adjustments where necessary, and give yourself a break.
4. Create a Section for “Misc” Purchases
When you’re building a budget, you’ll give yourself a limit on how much you can spend on everything from household bills to food, and electricity. However, it’s important to keep a little bit of cash aside for “other” things too. This other category can include moments of fun from time to time when you don’t want to miss out on a great opportunity, and it can also go towards those unexpected expenses we mentioned above so that you’re not always tapping into other essential cash.
Trying to cut all of the fun out of your life with a budget simply increases your chances that you’re going to end up giving up and over-spending. Giving yourself some grace room can go a long way towards improving your chances of success.
5. Remember to Count the Occasional Expenses Too
When you’re trying to understand how much money you spend each month, it can be easy to forget those once-in-a-while expenses like insurance if you pay annually, or taxes. Remember to think about annual costs as well as monthly ones so you can break the costs of big bills down into twelve sections. This will help you to avoid any sudden surprises one month when you realise you still need to pay your car tax or you have to shell out money for something that you haven’t planned for.
If you’re worried that you might be missing something out on your budgetary list, think about asking for help from your friends or family, or simply look back over your bank statements for the last year and make a note of anything that stands out.
6. Account for Every Major Change
Finally, when something changes in your life, your budget will need to change too. That means that if you suddenly end up getting a promotion and you have more money to spend, then you’ll need to sit down with your budget and think about that accordingly. On the other hand, if you end up encountering a problem that tightens your pockets, you’ll need to address that too. The good news is that once you have a budget, making changes to it isn’t as tough as it seems.
*This is a collaborative post*