In theory, budgeting is a great initiative to put your financial life in order. But in practice, it is really challenging. That’s because most of us see our budget as our way on how we would like to spend our money rather than a reality-check on just how much we can only spend to achieve our financial goals.
Without a budget planned, you won’t be able to track how much money goes in and out every month. There’s a possibility that you might be overspending your money on things that are not important and keeping you from being able to afford things that you enjoy.
Sticking to your budget is another battle. Setting all the parameters on how much you can spend on various monthly expenses is the easy part – but sticking to it is a whole other challenge.
But there are other ways on how you can be more financially aware so you can build a monthly budget that suits with your lifestyle and the one that you can actually follow.
Here are 5 tips on how you can set a budget that you can stick to.
- Create a system that you will use
If you are the type who likes to track everything yourself and to see exactly where your hard earned money is going, create a spreadsheet and set up the cells with the formulas so you don’t have to be calculating the numbers manually. Have a separate folder to compile all the receipts and bills at the end of the day or week to check where you have spent your money.
If you prefer to have a hand off approach in monitoring your budget, use apps in which you can link your bank accounts or credit cards and check your transactions monthly.
- Focus on the necessities
When it comes to creating a budget, you should have a tailor-fit approach. Your budget must be customized according to your current income and preferences. Prioritize your needs first before your wants. But don’t forget to include a budget for the things you enjoy just to balance it out. Create a budget that works best with your financial and personal needs.
- Automate your savings
When creating a budget, you usually ignore setting aside a budget for savings because your budget plan depends on your monthly expenses. Fortunately, there is a solution to that – set up an automation for your savings. You can link your checking account or from your monthly paycheck directly to your savings account to ensure that you are able to save money every month without thinking of manually depositing the money.
- Set up contingency funds
Even if you have the most crafted budget, it can be ruined if you don’t make room for contingencies. Emergencies happen and it can result in unexpected expenses that can put a dent to your budget. A car accident, a loan from a licensed cash lender, sickness in the family, a trip to the emergency room can occur at any season. So it is important to plan and set aside funds for emergency expenses. Not only could it prepare you emotionally, this will also relieve any financial pressure and you are able to stick to your budget.
- Constantly update your budget
When you have a major milestone in life such as getting married, buying a new house, having a baby or college expenses for your kid you need to keep your budget in check. These different situations will cause significant adjustments to your finances and on how you can afford to spend on other expenses or setting aside money for savings. Constant modification in your budget will help you stick to your budget. So you have to sit down and spend time reviewing your budget at least quarterly to make sure it is still tailored-fit to meet your needs and financial goals.
Your circumstances may change. You may have a job today or lose it due to economical factors, you may be moving to a different city, get married and have children. All of these things will affect your budget. Make it a point to review and tweak your budget based on your current goals and situation. If you already have an app tracking your budget, it’s easy to navigate round different budget categories to see where you can make room or prioritize one part over the other. Your budget needs to be customized according to your needs.
You have worked hard enough to earn your own money, so you must do everything not to blow it all off on senseless purchases. Sticking to a budget is easy if you integrate a little sacrifice by letting go of things that you don’t need.