Have you ever heard about the word Budgeting? You must have always dreaded hearing it, like every other person, because unfortunately, it has a bad rep. Surprisingly, even though budgeting does not sound like much fun, but when it's boiled down, it's just another way for you to plan out your money. Because, why not? Nobody wants to wrap up in a blanket, crying without tears and money, just because they spent all their money at a Black Friday sale; guilty pleasures, eh?
Truth being spoken, Budgeting isn't a straitjacket, like most of us perceive it as. However, it surely is a lifesaver which gives you the freedom to buy, at the right time, without making you feel like you'll be living just on water, for the rest of the month.
Budgeters are reported to be free of worries, as compared to random spenders. Here's a piece of expert advice; there's only one simple rule to get the best out of your hard-earned money, and that's MAKING A BUDGET!
If you're breaking out in a sweat and groaning with panics, don't worry, calm down! Budgeting may be curial to direct, whether you're a first-time budgeter or an organized person organizing a budget for years, you might still struggle to perfect budgeting. However, the pain is worth all the guilty-free joys you get later when you've saved enough at the mercy of your budget.
How can budgeting help you?
You must've heard this a thousand times before that; Money needs Budgeting. That's the mantra of our 90s' legends and financial experts, who've been shouting for centuries, from the mountain tops. Though the intensity of how many times you've heard this financial lesson is uncountable, it is still not enough preached. Yes, that's how much of great help it is!
Need some good reasons of how budgeting can help you? Now we're talking!
1. It keeps you from drifting money away aimlessly
If you're the one who aimlessly drifts into tossing money at every occasion, whether it be at a party or a mall? Every random cool thing gets a catch of your eye and you drool over getting to buy it right away, at the spot? That's going to make your dreams suffer at the end of the year. However, prepping up a well-planned budget forces you to map out your future goals and save up your money, which can make your dreams a reality. This may hit you hard that you won't be able to buy the new Gucci bag or the new leather jacket by Zara, but at the same time, if you have some goals planned ahead of time, your dreams might come true which you've been saving and longing for to come true. We guarantee you won't mind moving out of the store empty-handed, yet with a lot more in your savings, to buy a new house for yourself.
2. Don't owe it all to credit cards
In this era, people have started abusing credit cards by overusing them which itself is an alarming situation. The smarter way to keep yourself out of this abuse is to mot spend money, which you don't have. In other words, spend money on the limit of your pocket.
Looking at things in the happier scenario, when you've considered sticking to a budget, it is very likely that you won't find yourself in a situation where you don't have enough money to pay your bills at the end of the month. Be smarter and spend to the limit which you can easily afford, concerning the income you've earned. However, we understand that everyone is on the same boat of earning money with their efforts, but still, crunching numbers is not as much fun as shamelessly going on a shopping spree, even when you're running out of cash. But here's the twist, image yourself a year ahead of time, when your friends might be making appointments with debt counselors, and on the other hand, you might be happily jetting of a flight to the Maldives with your soul mate, for an adventurous vacation, or moving to your dream house which you've been forever dreaming for – You never knew what Budgeting has in bags to gift you!
3. Prepare for the Unexpected
You wouldn't agree more with the fact that life is full of unexpected events, just like the world is full of people who leave you awestruck with their unexpected behavior by not living up to your expectations (No, we're not talking about your ex). Well, life is surely full of surprises and you never know which one of them is going to get you laid off, make you sick or lead you to serious financial turmoil. But the most dreaded part of this scenario can be the fact that you're out of money because you've spiraled down into the depths of debt by overspending. Of course, saving up would've made tackling things easier, and it isn't easy too, but think about you having a budget that forces you to keep a share of your income for unexpected emergencies, using them you'd surely build up again, if and only if you had one!
Precisely, this is exactly why every one of us needs to focus on budgeting for the worst possible times when you'll be strapped for some cash. Budget your income, plan your goals and allocate to them, along with setting aside a chunk of your income as emergency funds so that when reality hits you hard, you're financially prepared up to fight it for up to at least six months or a year's worth of living and treatment expenses.
Dwell deeper and get to know the best tips for Budgeting with us!
Top 10 Tips for Budgeting
Knowing about budgeting must've had you hooked to it. Wondering how to take your hold on budgeting? Wanting to have a start on it or looking to make your budget better and perfect? Before we move forward towards the tips, let's be sure that every one of us maintains a positive yet right mindset towards budgeting because, in any case, if a person harbors a negative attitude towards it, there's a very little chance of them creating a helpful and effective budget. Creating a budget is solely a positive move towards helping you plan money smartly, rather than making it a hurdle for you. So,Get ready! We're sharing ten solid tips and approaching them sill surely help you process Budgeting, even more, smoother and effectively, to get the best result. Let's go through them together!
1. Know what's your Budgeting Goal
Everyone has their own goals for every dream or wish they want to accomplish, and the same fact implies when you're Budgeting. Before you take this first step, we congratulate you on taking the plunge of being part of a minority that prefers Budgeting – which surely pays off.
Though Budgeting is a great decision, you still need to figure out and decide that what's your goal to make a budget. In other words, decide on what is your purpose of moving towards Budgeting, which is likely to affect the decisions you'll make during the process. To help you out with deciding your Budgeting Goal, here's a list of reasons why people choose to be Budgeting. Mark yours on your budgeting planner, which will help you evacuate from the life of living paycheck to paycheck.
- You wish to save some extra money for unexpected emergencies
- Overspending is eating away all your money, and you need to save it
- Want to achieve your goals and values which need money
- To break the norms of living paycheck to paycheck
- Getting out from the depth of debts
- Achieving your long-term financial goals
- Avoid spending the un-earned money
To some, it may sound a bit silly, but the reality is that motives and psychology play a major role in how we handle money and why we want to handle money. In other words, determining why you want a budget involves lots of emotions. Though Budgeting ensures that your goals will be achieved, the process of hashing out finances still flushes out a lot of emotions and enhances motivation.
2. Make a Realistic list of Your Spending
Creating a realistic budget isn't as easy as it sounds because before you make one, you need to know where you're currently spending your money. Unfortunately, if you don't focus on where your money is going, your budget might end up being just a wish list. We recommend, track your spending for at least a month before you get on to budgeting by using any one of these tracking ways suggested by experts.
- Excel Spreadsheets –In this digitized era, we doubt that there's someone who doesn't know how excel is the most trusted for finances. Use this hands-on approach by entering your spending every day on the sheets, immediately when you've made one so that you get a clear receipt of your spending.
- Tracking Applications – To get an accurate assessment of your spending, get your credit cards and debit cards linked to apps lie Mint, DollarBird, and Pocketguard so that each transaction is labeled correctly as spending.
- Bank Statements – Everyone does have a bank account, where you've kept all your money thinking that it's safe, but is it safe from the monster inside you who loves shopping? Unfortunately, No. But you can still use the bank statements and credit card records to track down your spending, which will help you out in budgeting realistically.
Tracking through any one of these ways can give a very realistic insight into your spending, and for the best part, if you track them dating back to two or three months, it can give your budgeting plan a jump-off.
3. Catch the Irregular Monthly Expenses
Budgeting not only needs to include your regular monthly expenses because not every month is the same. Make a smart move by keeping a keen view at the irregular events occurring every month, be it Black Friday in November, Christmas in December, or your Best Friends Birthday in July, you always need to have a separate chunk for these in your monthly budget. To avoid getting into holiday debt, here's a list of irregular expenses that you might need to look out for a while Budgeting;
- Christmas
- Thanks, Giving
- Birthdays
- Annual Car Registration
- Annual Health Care
- Property Taxes
- Annual Insurance Premiums
- Annual Medical Exams
For the best results, get your hands on a calendar and mark all these expenses over it to plan your budget effectively.
4. Consolidate all your Incomes
Before you plan on making a budget, you must know how much income you're earning every month. Whether it is constant or variable and later plan accordingly. Some of the constant ways you might be getting income are;
- Job Wages
- Money from Side Gigs
- Alimony
- Business Income
- Income from Investments
Contrary to this, if you have a variable income, the best way out is to be your boss. Yes, you heard it right, give yourself a fixed salary every month, to make an effective budgeting plan. Though you can keep the salary as low as the amount you earn in the lowest of your month, to reduce the risk of overspending.
5. Align a Separate Budget to your Personal Goals
Personal goals are the closest to your heart and surprisingly the most crucial part of making a budget. Generally, your purpose of budgeting is to save money for achieving a certain goal, and it's you who are to decide which personalized goals needs how much of your budget's chunk. Align your Personal Goals budget separately of you're;
- Saving for Retirement
- Building an Emergency Fund
- Planning to Buy a House
- Buying a New Car
- Paying off Debt
- Saving for College
- Planning a Vacation Escape
Achieve these personalized goals by allocating a separate budget to any of them which is a part of your priorities goal pool.
6. Allocate a budget to each Budgeting Goal
Once you've decided on all your financial and personalized goals, you must allocate a budget to all of these, relative to what they demand to process effectively. To be exact, plan out smartly that how much do you need to save for each of your goals to be achieved at the earliest.
For example, you wish to buy yourself a new car which costs $200000, which requires a down payment of $40000. To achieve this goal, you'll need to save up $3333/month, for 5 years, to achieve your goal of buying a car in at the end of the next five years. Likewise, you can also allocate a budget to save up for;
- Retirement
- College Fee
- Buying a House
The key to perfect budgeting is allocating specific budgets to every goal, be it a bigger one or a minor one because you don't want to end up with a failed budget.
7. Decide on the Kind of Budgeting you'll follow
After you've done all the preliminary work, the most important tip is to decide the kind of budgeting, which makes the most sense for your budgeting goals because, of course, there's not only one budgeting method in this world, there are tons of them! Decide on any one of these famous ones;
- Zero-Based Budgeting – This approach is based on the rule; Income minus the Outflow = $0. This may look a bit scary and may not work for every one of you, but it works the best when your goals are to repay a debt.
- 50-30-20 Budget – This approach works the best if you're just planning a smooth budget, which caters to all your goals. Using this approach for budgeting, 50% of your income is allocated to your basic needs like food and rent and minimum debts, 30% goes in for your entertainment and enjoyment (you'll surely love this part of your budget), and 20% goes in as your savings for retirements and surprises coming your way. This approach is believed to be the most flexible one, which surely won't create any hurdles if you're new to budgeting.
8. Use Logistic Tools to make your Budget
If you're not an excel person, you need not worry. While excel needs to be operated manually and requires you to enter your spending details regularly, we've found some alternatives for you. These popular Logistic tools, aka Budgeting applications, work great, all while being connected to all your financials.
- Mint – It allows you to track your budget limits, all while being connected to your financial accounts and credit cards. Mints create a budget for you, free of cost, giving you the ability to set your budget limits, specify how frequently you're going to incur an expense, all while adding up your leftover money to your next month's start.
- You need a Budget – YNAB is an application that allows you to create a budget for yourself, track your budgeting reports, and allocate to each of your goals. It costs $6.99/per month.
- Pocket Guard – The name says it exactly what it works for; guards your money and warns you about your spending limits, keeping your money safe from your own hands. It works based on the goals and limits you've set, all at the cost of $3.99/per month.
9. Avoid Common Budgeting Mistakes
Perfect Budgeting is not something realistic because teeny tiny bits of things can always go wrong with it. So, don't be discouraged if things go wrong for the first time, as the ones doing it for the 100th time also go wrong, but for the most part, it's always helpful if you learn from the mistakes of others. Try to avoid the following commonly made mistakes while you make your budget;
- Setting Unrealistic Expectations from a Budget that is too mainstream to be followed
- Don't make a Budget on Gross Incomes
- Cutting Discretionary Expenses; They don't help you save your income as big changes do. For example, selling your car might help, but cutting off your internet connection won't.
However, these aren't the only budgeting mistakes, and you never know what you might make, maybe a unique and bigger mistake? Don't worry; you'll eventually learn perfect things with time.
10. Hold yourself Accountable
Budgeting doesn't ensure the success of your goals, because what's the use of making a budget when you're not even going to follow it? This, my friend, is the real test of your nerves!
Learn to live by your budget by holding yourself accountable for each of your unachieved goals. Try every trick and tool you can, to stop yourself from hoarding over new debts. Though some of you might be disciplined enough to control yourself, the others might need some help. We suggest, hop over to any one of these approaches and get over your nerves that are always reaching out for shopping sprees and party nights.
- Automate your transactions - Don't bring in money in your hands, pay your bills through the bank so that it goes where it needs to go, rather than coming home with an unnecessary pair of new shoes.
- Track Your Spending – Get your budget and your finances integrated over an application that warns you when you go beyond your set limits. See right where you're messing up with your money and hold yourself accountable for every goal which will remain unachieved this month too.
Above all the tips mentioned here, the best practice is to use a Budgeting Software
If you are running a business, then the performance of your business purely depends upon planning, budgeting and forecasting. When it comes to budgeting, you need to use a system that offers pure transparency. The top budgeting tip is to use a budgeting software. Some of the best budgeting software allows you to create and manage your budget efficiently. Whether you are running a large business set-up, or you are a start-up, budgeting software can be the best way to create your spending budget. They can accommodate any size and type.
CalenderBudget, MoneyManager Ex, PlanGuru, Budget Maestro, Vultus Connect are some of the best Budgeting software solutions that can help you with the best budgeting processes. If you are not ready to invest in a tool that comes with a usage charge, you can always try using the free and open source budgeting software solutions.
In a Nutshell
Budgeting helps you control money and lets you sleep shut-eye and shut-brain sleep, which most of the people spend tossing and turning worrying about how they're going to pay the monthly bills. Follow these tips, and you'll surely get the peaceful sleep while the monster stays out of your head and your room, aka Money.
