Do you sit down and write out a monthly budget for yourself? By estimating your monthly income and expenses, you can know whether or not you have enough money to cover everything.
More importantly, a budget offers a clear view of where all your money goes without having to guess and think about it all the time.
A budget is also the first step toward getting out of debt. It will help you figure out which expenditures can be eliminated in order to maximise your income savings.
Unsure if your budget is providing you the most financial benefit? Check out the following 10 tips for building a better budget:
1. Know Your Objective
Everyone has their own reasons for budgeting. Most people will budget to track their money and see where it gets spent each month.
Are you budgeting to save more money? Perhaps you’re saving up for a vacation or another major purchase. Understand your reason for creating a budget and have a clear objective of what you want it to accomplish in your life.
2. Plan for Emergencies
Your monthly expenses will never stay exactly the same. For instance, your landlord might raise the rent, or the power company might increase their energy rates.
To make matters worse, an emergency could arise which might cost you hundreds or even thousands of dollars. Things like car problems or health problems are never expected, but they cost a lot to remedy when they arise.
You need to plan for such emergencies by having a cash reserve on standby. Be sure to allot a modest amount toward your emergency fund each month.
3. Eliminate Luxury Expenses
We all like to spoil ourselves now and then. You might like to eat out at restaurants, go to the movie theatre or see your favourite band in concert.
These are all considered luxury expenses because they are things you want but really don’t need.
If you find that your budget is tight every month, try eliminating these luxury expenses in order to save more money.
4. Use a Budget Worksheet
A budget worksheet helps you organise your expenses by placing them into separate categories. Many online programs and software are designed to help you budget.
These budgeting programs feature spreadsheets that make it easy to list all your expenses and the income you have available to pay those expenses. The software includes mathematical tools for conducting calculations, as well.
5. Make Budgeting a Team Effort
If you share expenses with someone else, such as a spouse or partner, then get their assistance with budgeting. After all, their income and expenses have an impact on you too.
If you both sit down and figure out the budget together, you won’t end up cutting expenses that adversely affect your partner’s life, and you’ll both be on the same page in your spending.
6. Destroy All Credit Cards
Credit cards are a debt trap into which you don’t want to sink. People who don’t budget might use credit cards to pay for things that they can’t afford. If this spending continues on a monthly basis, the credit card and interest debt will pile up.
Therefore, it is better to stop using any credit cards and only pay in cash. Then you can be sure that you only spend your money and not borrow money which has an extra price attached to it.
7. Pay Off All Loans
If you have the ability to pay off all your loans, or at least consolidate them into a lower monthly premium, your long-term savings can be monumental.
You’ll not only save on all that interest, but owing fewer companies payments each month also makes budgeting all the easier.
8. Remember Miscellaneous Expenses
You need to plan for some unexpected minor expenses to arise. These are not emergency expenses, such as major medical bills, so don’t confuse the two.
Miscellaneous expenses are things like new light bulbs, new shingles for the roof, oil changes for the car, etc. They aren’t exactly emergencies, but they are things you will need eventually, just not every month.
9. Maintain and Modify Your Budget
Do not assume that your budget will always stay the same. You will need to constantly revise it to accommodate any changes in your life, especially pertaining to your income and expenses.
Therefore, be sure to check your budget on at least a weekly basis to ensure that everything is up to date.
10. Plan to Save
Part of your budgeting should include saving money. So many Australians have little money saved because they don’t budget for it.
As you cut expenses and consolidate debts, try to put some money aside each month in a savings account. Then you can let the money build up while earning interest on it, too.