by Shevi Goodman ·
Modified on 19 October, 2023
Budgeting can seem daunting and is often a word savers hate to hear, but if you do it right, budgeting can really help you avoid any financial hardship.
The process can empower you to take control of your money, plan for the future, and achieve your financial goals. Yet, creating and sticking to a budget can be a daunting task for many. In this guide, we’ll delve into the top 10 tips on how to budget effectively, helping you master the art of managing your finances and building a more secure financial future.
Key Points:
- In 2021, around 80% of Americans reported using a budget to help them improve their finances.
- Using budgeting apps such as Mint and Honeydue allow you to categorize your spending, and spot where you can make changes and savings.
- You could create a manual budget by creating an incoming and outgoings spreadsheet, ensuring that you plan your spending accordingly.
- Canceling unused subscriptions such as for streaming websites can save you money on a monthly basis.
- Try and use low or no interest credit cards to prevent spending money on interest repayments.
1. Have Goals In Mind
Whether you are trying to pay off a loan, debt, or merely need to create a reserve of savings for retirement or a rainy day, it is important to remember your goals – it will motivate you to keep going.
Of course, knowing what you are budgeting for creates quantifiable goals as well as motivational ones, as it provides a target of how much you need to save.
2. Use a Budgeting App
Budgeting applications can be downloaded to your smartphone or tablet and assist you in measuring and controlling your spending and saving. These apps can be connected to your credit cards, debit cards, and bank accounts to track your spending and help you recognise where you can make changes.
Many of these apps allow you to set up standing orders to your savings accounts, ensuring that you are automatically saving without having to constantly remind yourself.
3. Budget in Advance
Budgeting takes planning, and is sustainable if you plan ahead and account from your expenditure. If, for example, you are budgeting on a month-by-month basis, it is important to think about December in November.
By thinking ahead, you can pre-empt the purpose of your income. For instance, if you have a monthly wage of $3,500, you should think ahead and consider what proportion of that will go towards paying debts, daily living costs, and how much you will contribute to your savings.
4. Remember, Monthly Spending Can Vary!
This is why planning ahead is so important. If you have family birthdays concentrated in the winter, your outgoings in the winter months will naturally spike. By circling these dates on your calendar well in advance, you can spread your spending across the preceding months, and not panic when birthdays and holidays roll around.
You could even create an additional savings account – one for spending on gifts, in addition to one intended to pay off living costs and debts.
5. Prioritise Your Payments
You should think carefully about which costs or debts you should pay off first. Debts which could compromise your living standards – namely food and electricity – should be near the top of your priority list.
Additionally, debts that place your assets at risk, especially those declaring your assets as collateral, deserve special attention in your budgeting strategy.
6. Be Prepared To Cut Back!
Budgeting often involves periods of financial difficulty, but remember that these situations are typically temporary. In times of financial strain, you may need to make some adjustments that, while not ideal, can help alleviate the pressure.
This might involve canceling subscriptions to music platforms and magazines, adopting more frugal shopping habits like exploring thrift stores, and being mindful of impulse purchases. These temporary cutbacks can provide essential financial relief while you work towards long-term financial stability.
7. Leave Yourself Some Wiggle Room
You are unlikely to stick exactly to your budget, and that’s okay. But, for this to be sustainable, it may be sensible to keep a reserve for treating yourself by cornering off a small section of your income for ‘miscellaneous’ spending.
Sometimes prices rise unexpectedly, and it’s important to preempt that you may spend more than you ideally want to. Having something to fall back on in your budget can be very beneficial.
8. Be Careful When Signing Up To Services
Subscription services – whether for streaming movies, listening to music, or a monthly delivery – can be accompanied by lots of small print. Before committing yourself to these, make sure you are familiar with what the costs actually entail, and how to cancel your subscriptions.
9. Don’t Be Afraid To Seek Help!
Budgeting can be challenging, and you’re not the first person to feel that. Friends and family and professionals could provide useful insight.
f you find yourself struggling to gain control over your financial plan, consulting a financial adviser is a valuable option to explore. Their expertise can provide tailored solutions to align your budget with your financial goals effectively.
10. Go Easy On Yourself!
Budgets take time to perfect, and it is normal to find yourself stressed by the financial pressures of life. When that happens, take a step back and remind yourself of our first tip – why you are budgeting in the first place, and rest assured that there are lots of ways you can steady yourself.