4 Tips for Budgeting More Effectively
Ask anyone about how to budget and they will more than likely tell you to simply stow away all of your disposable income and cut down on frivolous spending. Whilst this might work on paper, it doesn’t tend to work in practice which is why so many people try – and fail – to budget effectively.
That being said, there are people who can naturally save and those who struggle more. Your lifestyle will typically influence your ability to save, and you need to keep in mind that your circumstances will differ from those around you which may mean your capacity to save is impacted.
Nevertheless, there are ways to budget and spend your money more wisely if you are committed, but you may need to approach it from a different angle. We’ve put together a list of four tips people who are struggling to budget can implement in order to try and be smarter with their money.
- Set Realistic Goals
The first step to budgeting is to set in motion realistic goals. Everyone will tell you to set goals, but they gloss over the ‘realistic’ part. Just because your friend is able to budget and save $400 a month, it doesn’t mean you can.
To set a realistic goal, you need to think about:
- How much money you earn
- How much money you need to allocate for bills and necessary outgoings
- What it is you’re saving/budgeting for
Ideally, your income should exceed your non-negotiable outgoings. If it doesn’t, you won’t be able to budget. If it does, you then to consider the reason you’re budgeting and whether or not you could overshoot the target. For example, if you’re budgeting because you want to save for a holiday, there’s no reason why you will need $500 more than the price of the actual holiday. If you’re budgeting for your future, there’s no harm in overshooting.
In any case, rather than being optimistic, be realistic. This might mean thinking about worse case scenarios and having a contingency plan, or it might mean you don’t need as much as you think you will because you’ve been unrealistic about the price of certain items.
- Work to a Set Timeline
Aimlessly saving seldom works unless you’re saving for your future retirement or an event that is way off further down the line. A timeline works in the same fashion as a deadline and is one of the most integral parts to being able to successfully budget. You can choose to look at it daily, weekly, monthly, quarterly or yearly. We’d recommend a monthly approach, but it depends on when you get paid, when your outgoings need to be paid and why it is that you’re budgeting.
- Be Flexible
Budgeting is about being strict, but that doesn’t mean there can’t be wriggle room. There will be times when unexpected expenses crop up or when you spend a little bit more than you were allocated to, but it’s not worth punishing yourself over it. Allow yourself a degree of flexibility so that when times this do occur, you’re not worrying about your budget plan constantly. Life gets in the way and sometimes budgeting takes a backseat. As long as you’re not routinely ignoring your plan, there’s no harm in being flexible.
- Start a Spreadsheet
Behind every good budgeter there is a spreadsheet to match. This is the easiest way of keeping track of your expenses and seeing where your money is going. It doesn’t need to be too complex or confusing. Include the basics such as:
- Overall income
- Overall non-negotiable outgoings (bills, rent etc)
- Expected one-off payments (car maintenance, charitable giving (Easter, Zakat) etc)
- Treat money
Following the four tips above should help you on your road to saving money and budgeting better. Remember though, life is too short not to enjoy and not everything has to come down to budgeting and saving.