Budgeting Tips

Budgeting Tips

A budget is a spending plan that includes everything you will spend money on. A good budget is a spending plan that includes everything you will be spending money on and should stay within your income.

If we don't budget, we lose control of our expenses and can't even figure out where the money went. Sometimes, there can be unexpected expenses like emergencies or hospitalization that you could not be prepared for. It is very important to set priorities and decide which expenditure is more important to you.

Tracking your spending

Knowing what things you usually spend money on is the first step in budgeting. This includes electric bills, loan or credit card repayments, food, shopping, medicine, fuel and car maintenance even pet’s necessities if you have one. Try to locate where your money is going to effectively set up and control your budget.

Keep a financial diary

• Select a defined time period like a month or 4 weeks;
• Keep a detailed record of all your expenditures. Write down several different categories like fuel, groceries, etc.
• One of the most important thing most of us forget is to include small items such as snacks, drinks, parking meters, tolls, donations etc. and all these add up and make you wonder where the rest of your money went.
• At the end of the month, use the category totals as part of your yearly budget;
• You may opt to look for any expenses that was spontaneous, wasteful or a luxury that you could do without in the future.

Planning a budget

A budget is a very helpful tool that can be used to save money

Controlling your expenses may not be that simple. These following steps will aid you to effectively manage your budget.

• Determine how much your total earnings are for a certain period of time e.g. a month, a week etc.
• Take away regular payments or basic expenses;
• Rent or mortgage repayments;
• Food and household needs;
• Utilities (phone/electricity/water);
• Transport expenses (travel passes, petrol, car registration, maintenance);
• Hospitalization and medicine;
• Insurance (health, house, car, travel etc)
• You should include annual expenses such as car registration and insurance in your budget. You can divide these totals by 52 for the amount to budget for each week (or divide by 26 for the amount to budget each fortnight or by 12 if your budget is calculated on a monthly basis).
• take off regular payments for lifestyle bills and expenses:
• Entertainment;
• Clothing;
• Personal grooming;
• Home appliances
• If you are not sure as to how much you spend; either make an estimate and review it after 3 months; or consider tracking your spending for a month.
• allot an additional funds to cover
• Loan repayments;
• Additional superannuation contributions
• You can use the money that is left to buy things that you want or to save.

Saving

Saving may appear to be difficult and disciplined, but picture of being able to afford to buy something you have wanted for a long time. Here are some tips to help you on your way.

Set yourself a savings target

Aim to save 10% of your gross annual income. This breaks down to 5% for short-term goals and 5% for long-term goals.

Tip - the 10% rule

If you’re not doing well on saving before, start off slowly. Leave committing to medium or long-term goals for a while until you're sure. A saving strategy is within your reach.

• Set one short-term goal - perhaps 3 months away - that requires only a small sum of cash;
• Then set aside 10% of your income each week in a different savings account;
• At the end of 3 months, use that savings to pay for your small goal - perhaps a weekend away or buy new clothes - and if there is any money left over make that the first installment in your next savings goal.

Develop a safety buffer

The key to successful money management is to put funds aside during the good times and to minimize financial stress during bad times. Keep in mind to allow for unexpected debts and emergencies e.g. illness in the family, loss or breakage of possessions, career interruptions etc.

Tip - how much is enough?

• Singles and couples should consider developing an emergency fund equal to 2 months take-home pay in case of retrenchment or emergencies.
• Those with young families should aim to build up an emergency fund equal to 3 months take-home pay.

• Don't make your budget too tight that it's impossible to keep;
• A budget is not set in stone. It is there to help, not delay you. A sign of a successful saver is one that is flexible during tough times and able to use the savings to reward oneself when prospects are brighter;
• If you blow your budget one month, try to keep up for lost finances in areas that are more flexible e.g. entertainment or eating out;
• Check your budget every 3 months to see if there are any areas you can tighten up to improve your financial flow.