You know you should do it and you know why, but making a budget and sticking to it has not been easy right? Well if you’ve tried and failed in the past to stick to your budget that is no reason to stop trying.
1: Everyone needs a budget
One of the things which can hamper your budgeting is thinking that ‘no one else has to budget, they can buy whatever they like’. Well that’s not true everyone needs a budget and if your friends or family appear to be carefree spenders, they have either budgeted for these indulgences, or they’re going to be struggling in other areas.
2: Know why you’re budgeting
Motivation is the most important factor in anything you do, and if you are attempting to cut back your spending, you need to be clear – and remain clear – about why. Perhaps you find you can’t pay your bills on time, or at all, or maybe you can’t afford to buy the things you want for your family, or there’s just never enough money to go out to dinner once in a while. Whatever you are trying to achieve in being more financially responsible, it is important to keep this goal clear in your mind, to keep your saving and budgeting on track.
3: Make a realistic budget
This means knowing what you spend week to week and being realistic about where you’re willing to cut back.
4: Budget for your costs
One-third of your wages should go towards paying your bills. This includes your bond/home loan or rent, your car payments or personal loans, and all the bills which keep your life running like electricity, water, phone and groceries. If your bills consume more than one-third of your wages, or the combined wages of you and your partner, first decide whether you’re willing to cut back on tip number 5 below.
5: Budget for your life
One-third of your wages can go towards your everyday personal expenses. This means you can go out to dinner, buy a new pair of shoes, etc. as long as you can cover the first third of your budget in tip number 4 above. It is important to budget for yourself because budgeting is just like being on a diet – if there is something you’re not allowed to have AT ALL you want it more, but if you can have a little chocolate or a little retail therapy, you’re less likely to fall off the wagon because it’s not taboo.
6: Budget for your future
One-third of your wages should go towards your savings account. When your salary comes in, make an automatic transfer to your savings account and pay yourself first. This means you won’t notice the funds being transferred and you’re more likely to make regular contributions if you don’t have to remember, or physically make them.
7: Focus on your savings
When you are budgeting you also want to be rewarded, which is why your savings accounts are important. It is a good idea to have more than one savings account for each of your savings goals as this allows you to focus on short-term goals, longer-term goals, and an emergency fund.
8: Budget for fewer luxuries
While you are allowed to spend money on yourself and save up for things you really want or need, part of making a budget is cutting back on things you don’t really need. Therefore, look at the luxuries you do indulge in and decide where you can cut back. Is it possible to go to the hairdresser every eight weeks instead of every six weeks? Perhaps you can clean your car yourself each week and indulge in professional detailing just once a year?
9: Budget for less splurging
Being on a budget means that retail therapy is not an accepted form of treatment unless it’s in the budget. It might make you feel better to buy a new dress and shoes, or a new set of tyres for the car and tickets to the big game, but you can only splurge if you have enough in the third of your wages which is set aside for your lifestyle.
10: Monitor your actual expenses
If you’ve followed all of these tips and still find you can’t pay your bills or afford to make contributions to your savings, it’s time to carefully analyse your spending. The most common cause of a budget failing in this way is the fact that you have underestimated your expenses, but instead of going back to your calculator or your spreadsheet – hit the streets and make a tally of EVERYTHING you spend in a month and keep all of your receipts to help you remember.
This means keep the receipts of every expenditure – big and small, so you know exactly what you’re spending. Then go back to your budget and see if you really have underestimated your spending, then make adjustments.
*by The Gen Reporter
