Budgeting should be a mandatory part of every individual’s financial life, as it allows one to create an organized spending plan that is pragmatic in nature. If you struggle with your finances on a regular basis, it is best to adopt certain budgeting tips in order to make the best out of your money matters. Once you master the art of budgeting, you will be able to get out of debt faster, and you won’t have to avail same day loans or instant cash loans when faced with an emergency. Here are some budgeting tips to facilitate easy money management:
1. Identify ‘Needs’ vs ‘Wants’
‘Needs’ are crucial, holding the ability to hamper your physical, mental, and financial wellbeing when not met with. Think along the lines of food, rent, debt repayment, basic needs, etc – factors which are bound to be part of your budget. While needs and wants vary from one person to another, try and identify what works best for you. Also, consider the 50/20/30 rule while working out your budget, wherein 30% of your income must be allocated to the ‘want’ category – essentially, things which are not integral to your lifestyle, but only serve it enhance it.
2. Keep Your Receipts Organized
It is important to keep your bills and receipts organized so that you can refer back to them in case of dispute. This might also come in handy for tax purposes. For physical copies of bills, it is best to store them in expandable folders and file them in a month-by-month algorithm. If you receive your bills/receipts electronically, save them in an online drive or folder.
3. Use Multiple Accounts
Using multiple checking accounts can keep matters organized – for instance, having a separate checking account for fixed expenses such as rent and car payments will make it easy for you to budget the amount you spend on flexible categories, such as food and miscellaneous expenses. In order to make the process easier, you can take the help of budgeting apps or seek help from a financial advisor.
4. Prioritize Debt Repayment
While you might want to go on a trip to Bali or Bangkok and wish to save up for the same, you might want to put such plans on hold until you’ve paid off your existing debt. Once you prioritize debt repayment, you will be able to save money in terms of interest rates and bolster credit utilization. Just keep in mind that your credit score might take a hit if your credit utilization is over 30% of your limit.
5. Divide Food Expenses into Two Categories
As food is bound to be a significant part of your everyday expenses, it is crucial to budget the same in a judicious manner. Keep groceries and eating out as separate budget categories, as this will make it easier for you to keep track of your expenses. Consider paying at restaurants or eateries with a credit/debit card so that you can follow up on the electronic receipts when you monitor your budget at the end of the month. Buy your groceries with cash as this will keep you grounded and prevent you from splurging and straying away from your budget.
6. Designate a No-Spend Day Once a Month
Designate one day per month wherein you do not spend money unless it is absolutely necessary. Consider the savings garnered from this day as fixed and transfer the same into your savings account. This will gradually become a habit and urge you to save more in the long run.
To conclude, it is important to realize that budgeting is a gradual process and it will take some time for you to achieve financial independence and stability. However, once you do, you will be able to fulfil your dreams and live a stress-free existence!