Budgeting is spending less than you earn so that you can maximize your savings, avoid credit card debt and achieve the financial goals you’ve set.
Budgeting is a bitter pill that is one of the most important components for our financial success. It’s not exactly difficult to implement; all it takes is some patience and self-control and unlike the common notion, it’s not limited to people with limited resources.
Track your cash
Before setting up a budget, you first must know the flow of your money. You can track our money using various techniques:
- The simplest and least expensive way is to keep a notebook which keeps track of all of your transactions. It may be the easiest way to do things, but it’s also the most dangerous way. You can easily misplace your notebook or ruin your record if any liquid spills on it. If you’re planning on keeping a long-term record of your money, this may not be the most reliable way.
- The next way is to make a spreadsheet on Microsoft Excel. This is easier to track your income and expenses as you’re less prone to mistakes and calculations can be easily done.
- You can also use various online software, some of which are free, while others are not. As they are online, they can be accessed anytime and anywhere.
How to take the bitter pill?
Now that you’ve chosen a way to track your money, you will have to start using a system, but the question that arises now is, where to start?
The first thing you can do is keep track of every expense you’ve made, no matter how big or small. You can easily remember the big things such as the rent of your apartment or the monthly installment of your car, but when it comes to the little things, we often forget. For instance, you may not remember the small amount you paid to watch your favorite movie in the cinema last week. If you have a problem with keeping track of everything, try using the same credit card for every purchase you make. Another solution is to withdraw a particular amount either every week or every month so that you don’t overspend on unnecessary commodities.
The second thing to do is to update your budget daily with accurate descriptions. By doing this, you’ll be able to track your money in the least possible time and you will be less likely to forget something.
The third and last thing to do is to plan not only for the fixed expenses but also for the variable and occasional expenses such as the rent and installments as well as your groceries. Occasional expenses such as new clothes for the holidays or for the wedding of your best friend also have to be planned.
Your budget does not have to be too rigid, and it can vary with your lifestyle. Plan the budget according to your minimum possible wage so that at the end of the month, you can get a pleasant surprise about how much you have saved.