Budgeting isn’t just about what you can’t do. It’s a positive, powerful tool to help you reach your goals, to do what you want to do, and live the life you want.
If you don’t budget your spending, it can be hard to know where all the money goes. A budget provides a sense of control and can make the difference between planning and going into panic mode.
With a budget, you’ll know how much money has been spent on what. With no accountability system in place, it’s easy for your spending to get out of hand.
A budget is a plan that can help you control your spending, save money, and reach your financial goals, like saving for a car, an overseas holiday or a down payment on a house. But how do you build a realistic budget to which you’re likely to stick?
Building a budget can seem daunting, but it doesn’t have to be
Just take it one step at a time and you’ll be on your way to financial success. Budgeting is all about balancing money with priorities and finding what works best for you.
The first steps
You need to first figure out how much income you have coming in each month. Next, list all of your regular expenses, such as rent, food, transportation, insurance, phones, hairdressers and entertainment. Be sure to also include occasional expenses like car repairs, doctor’s visits or presents. Once you know how much money you have coming in and going out each month, you can start to make a plan, and that’s the easy part.
It’s sticking to a budget that is less easy. If you’re too hard on yourself or you think you can keep your budget in your head, which is very tricky, you might get discouraged and give up.
So, we want to give you tools, resources and strategies that’ll help you stick to your budget so you can reach your financial goals and thrive.
1. Remember your ‘why’
The best way to make yourself stick to a budget is to remember why you’re doing it. Are you budgeting to get out of debt? Are you budgeting so you can feel in control of your finances? Are you budgeting to save for a wedding, so you can go on a wonderful holiday or so you can buy your own home?
Whatever your goal, make it clear and remind yourself of it. Stick a picture on the fridge and track your progress by marking off days on a calendar or a savings thermometer.
2. Make your budget realistic
Keeping your budget attainable and realistic is the key. Once you have a good idea of your income and expenses, set some limits and decide how much you can afford to spend in each category. This may mean saying no to some things, but don’t cut back on all things nice. If you’re too restrictive, you’ll just keep going over budget and next thing you know, you’ve overspent big time, are feeling defeated and just stop budgeting.
Instead, make your budget realistic. Cut back in some areas, but not on everything all at once.
3. From small things big things grow
Are there any luxury items that can be cut or reduced? Trimming these can have a big effect while not completely destroying your sense of happiness in life. Try finding multiple small cutbacks by going through your bank or credit card statements line-by-line. You may find you’re spending little amounts a lot. If you can make several small cutbacks, such as eating at home, taking lunch to work and limiting those ‘proper coffees’, they can add up.
A coffee and a sandwich might not feel like much, but they are easily $75.00 over a week. Small changes can mean quite big savings quite quickly.
4. Automate your money
Spend less time paying bills and debt, and make sure you don’t get behind by setting up automatic payments and transfers. You can pay all your regular bills like rent phone etc and also pay yourself. You can transfer ‘play money’ to one account you’re allowed to spend and put aside money for savings into another account that you can use for emergencies or unexpected expenses.
5. Sleep on big purchases.
Don’t impulsively buy things that you may not need. Impulse purchases can be a huge budget buster. Give yourself time to think about whether or not you really need something before you spend money on it. Will it add value to your life or just stress to your budget?
Take a week to think about it. If you’ve then forgotten about it, there’s a pretty good chance you didn’t actually need it.
6. Make sure you’re on the best deal
Check if there are any subscriptions you could live without or have forgotten about. Do you need them all? Probably not. All those ‘only $10 a month’ fees add up quickly. Shop around for phone, electricity and internet providers. Try using comparison sites to see if you’re on the best plan for you.
Reducing bills by $10-$20 a month adds up to big savings over a year
7. Use technology
Try using apps and the Internet to find lower prices when shopping, particularly for petrol. Shopping for bargains and looking for better deals can be a good investment of your time. It may also help to use a budgeting app or online tool to track your spending. Try grocery shopping with a calculator.
8. Do your grocery shopping online
We all know those non-necessities and treats sneak into the grocery trolley. Sometimes, these little extras can take up the majority of your grocery bill. If you can shop online and pick up your groceries or even have them delivered, it can save time, and fuel and can cut out those spur-of-the-moment purchases. Shopping online can also make comparing brands and prices and finding the best deals easier.
You may be surprised to find that the cheaper brands can be just as good as the more expensive ones.
9. Plan your meals.
Meal planning and sticking to a grocery list are some of the easiest ways to keep your money in your pocket. It can help you save money by avoiding impulse purchases and stopping uneaten food from going off in the fridge and being thrown out — a waste of food, money and a drain on the planet. Plus, it’s a good way to help make healthy eating choices.
10. Give yourself ‘fun’ money
The reality is you won’t stick to a budget, if you cut back so much you get bored, overwhelmed and depressed. You’ll just quit budgeting. So, allocate yourself some ‘fun money’ each month you’re allowed to spend on anything, for example, happy hours with friends, takeaways or going to the movies (and the popcorn).
Fun money is for the extras so you can still have balance in your life.
Build a great budget and small amounts will grow into something larger
By following these tips, you can build a great budget that will help you save money which can ultimately pay for that holiday, that emergency job on your car, or maybe it helps you buy a house. Remember, if you think about budgeting differently and you can turn it from an onerous chore to an activity that’s almost fun!
For information on independent confidential budgeting services or advice, visit www.moneytalks.co.nz.