We all know that we need to budget, especially in the current economy, however, many people simply do not know how to budget. Let us walk you through the process and soon you will know how to budget like a pro!
The two main reasons that it is important to budget are:
A budget puts you in control
Having a budget helps you to keep to your financial goals
A Budget Puts You In Control
When you put together a good budget, it allows you to not only prioritise your spending but also keep track of your monthly spending. When you set up a budget you know what is going into your account, and more importantly, what is going out of it. This ensures that you stay on top of all your expenses, come up with a plan to lower your debt – while avoiding future debt and help you to identify unnecessary spending or areas where you could possibly save more.
Taking Control
To start with we advise you to download our budgeting template below. This is an invaluable tool for any smart spender who would like to take control of their finances.
No Need To Track Every Expense
Yes, you have to track your expenses, however, you do not need to track every expense. As an example, you keep track of your petrol expenses BUT if this will not change your spending there is no need to keep track of this expense.
Where We Are All Guilty Of Overspending
You can only do better when you know better and it is no different when it comes to budgeting. The sooner you can clearly see what your spending habits are, the sooner you can take steps to correct this behaviour. The 3 main categories most people overspend on are:
Entertainment
Eating Out
Impulse Buys – fashion and gadgets
Keeping Track Of Your Financial Goals
It is important to remember that a budget is ever-changing, changing as your wants and needs do. By keeping your budget up to date, you are able to keep track of your monthly expenses accomplishing financial stability.
What Is The 50/20/30 Approach?
The 50/20/30 approach is simple and effective when you are new to budgeting and can have a huge impact on your finances. This approach divides your income as follows:
50% of your income goes towards your necessities
20% of your income goes towards savings and investments
30% of your income goes toward lifestyle
50% - Necessities
This category could include:
Bond or Rent
Transport
Cell phones
Food
Water and Electricity
20% - Savings and Investments
Long-term Investments
Retirement Savings
Educational Savings or Investment
Emergency Fund Savings
30% - Lifestyle
The 30% Lifestyle allocation is for anything that is not a basic necessity.
Restaurants and Take-Aways
Gadgets
Home Decor
Activities
Entertainment
As you can see, having a budget does not mean that you are unable to enjoy life. Having a budget simply ensures that you do not spend more than you can reasonably afford.
If you find that you are not able to get through the month according to your budget, you may need to take some additional steps such as:
Curb your impulse spending
Compare prices more carefully
Try to only take the amount of cash you need with you on shopping trips
Limit the number of take-aways you get per week
When you eat out, choose restaurants that offer value for money
The key to financial freedom is recording all your expenses throughout the month and ensuring that you stick to your budget. No one gets it right the first time when it comes to budgeting but the important thing is that you do not give up. If you consistently work on your budget and stick to it, you are well on your way!
Take a look at our article – Top 20 Budgeting Tips for more information that might help you to stick to your budget better.
Still, Not Able To Get Through The Month On Your Budget?
Still unable to get through the month, even after sticking to your budget? Complete the Call Back form below and one of our professional Debt Counsellors will call you.