We all have something that we’d do if we had a little extra cash. Whether it’s making a deposit on your first home or buying a private jet, there’s always something we’re dreaming of that’s just out of reach. With that in mind it seems a little strange that many of us are flying blind when it comes to saving. We have the vague idea that we want to save money, but no concrete plan when it comes to implementing financial change.
This is where a budget comes in. A real-life document (or at least a well-designed app) that dictates exactly how much money is coming in, and where it’s going to go. If you’ve never lived by a budget before, now’s the time to start, it’s simple stuff and it’s a step towards saving success.
By Michelle Balogh, Money Maven.
Set aside a good amount of free time to work on your budget and gather all the necessary information. You’ll need bills and bank statements, a complete record of the spending-machine that is you.
First, write down your fixed expenses. Rent, mortgage repayments, phone bills, school fees – the spending that you know is going to happen no matter what. Once you’ve deducted those costs from your income you can move on to the variable expenses – entertainment, food, transport – the areas you could tighten or loosen spending if you wanted to. This is your chance to make a small change that could have a big impact on your life.
Top 5 Tips:
1. Don’t bother writing a budget without a cause: You won’t stick to it. To keep those purse strings tight make sure that you have exciting long term goals to keep you motivated. Whether it be finally climbing out of debt, saving for travel, making investments or putting down a deposit on your dream house, you need a bright light at the end of the tunnel if you’re going to be depriving yourself of your short term spending addictions.
That said, long term goals aren’t always enough. Make sure you set a couple of easy-to-achieve short term ones too. The high you’ll feel when you save that extra $50 a week will help keep you on track and ensure that you arrive at the final destination.
2. Keep a spending diary: Try to write down your expenses as often as possible – this will make following your budget easier and help you to discover your own spending habits. If you don’t have time to worry about writing down expenses all day we recommend collecting receipts and going through these, in conjunction with your online record of bank transactions, once a week. Between these two records you’ll have a pretty accurate picture of precisely where you’re money goes. It might not be where you think!
3. Be realistic: Setting goals that you are never going to keep will gain nothing but an unnecessary blow to your self-esteem. If the one thing that sustains you through your work day is that hot cup of coffee, don’t vow to give it up. You’ll spend a few days as the office grump and then give in all together.
On the other hand, if you can’t go without a new outfit once a month, but only buy coffee because your colleagues do, keep your beloved Ted Baker hit and drop the daily java to save an extra $25 a week.
4. Be flexible: If it comes to the end of the month and your expenditure doesn’t look the way you thought it would, don’t fret, and definitely don’t give in. Your month of hard work has provided you with a clearer picture of who you are and how you can improve. You might have overspent by $100 on entertainment, but where did you underspend? Perhaps you spent less on petrol than you guessed or never got around to buying $50 worth of cleaning products. Shuffle the numbers, adjust your expectations and create a more achievable outline for next month. It might take some time before your a budget-blitzing babe, but you’ll get there, and you’ll feel even better for how far you’ve come when you do.
5. Don’t forget those extra costs: You might not get your car serviced every month but it’s an expense that will inevitably come around. Consider all costs when writing your budget, even the ones that don’t come around every week. This way you’ll avoid going into a panic when christmas sends your shopping budget out of whack or a broken phone sends your technology figure into a nose-dive.
Whatever your budget looks like, it’ll be a great tool and you’ll soon wonder how you lived without it. It’s not just a way to make life scrimpier, it’s a step towards fulfilling your home-owning, globe-trotting, debt-free dreams.
You might also like:
Finance Expert Anthony Bell’s Top Tips for Preparing and Sticking to a Household Budget
Budget Booster: How to Save Money in Just One Day
Entertaining without the Expense: Budget Dinner Parties