Budgeting is an estimate of your income and expenditure over a specific period of time. Put simply, a budget is a set plan to help you reach your financial goals. Having a budget in place gives you peace of mind knowing that every dollar you earn has a purpose and job to do. Those that keep budgets find themselves less stressed over money as well as more understanding of the power of planning.
Here are our best budgeting tips:
Budgeting to Zero
Give every dollar you earn a job to do. I’m not saying use every dollar to pay down debt or pay forward bills. What I mean by this is to set every dollar a task. Whether that be to pay bills, save but also set the amount you have for ‘spendings’
Following a zero based budget is a great way to start.
Whether you are married or de facto you should be budgeting together. Sit down every month or however often need be to set out and update financial goals. Working together towards a common goal will help reach those goals faster.
If you are single, find a friend or family member to use as an accountability partner to help you stick to your goals.
Every budget period is different
Budgeting is not a set and forget task. You need to update and adjust your budget periodically. For us, we do this quarterly. Our financial goals (mostly working on paying down debt) usually stay consistent over this period. However, if a new goal arises within this time we reevaluate our budget accordingly.
To begin budgeting, I would suggest a monthly cycle. Over time this will become a very short task making sure you are on track to reach your goals.
Categorize your budget
Breakdown your budget into categories. With necessities and savings top of the list. Then followed by wants and spendings last. We follow a 50/30/20 style budget when categorizing to make sure we are not splurging on anything not completely necessary.
Pay off debt
Paying off debt should take a high priority in your budget. Just paying your minimum monthly repayments costs you dearly in interest. Always pay extra on to your debts. The smallest amount contributed extra every month will make a big impact long term. Smash down those debts!
Trim the fat
Don’t be afraid to cut expenses to give yourself more to save. Evaluate expenses like streaming services, subscriptions and any other ‘wants’ and their actual value to you. A lot of the time we find ourselves paying for ongoing services we don’t actual use very often. Trim that fat and put more money in your pocket.
Track your progress
From time to time you should be tracking your progress. Following a budget can sometimes become tiresome. Counteract this feeling by having a method to track your progress. Seeing how far you’ve come will give you a feeling of accomplishment, motivating you to continue. Tracking your spendings is part of this.
Have a sinking fund
As part of our regular budget we have a ‘sinking fund’. This fund is specifically for any upcoming events, unexpected expenses and/or any maintenance ect. Having a car repair suddenly pop up can throw your budget right out. Counteract that by having a separate savings account specifically for expenses like this. Life in general will not allow you to follow a set budget without throwing a few curve balls your way. By having a sinking fund you can hit those curve balls out of the park!
Use cash where you slip up
If you find yourself overspending in categories like groceries or spending money. Cash out the budgeting amount and leave the card at home. Using cash doesn’t allow you to overspend. You have your set amount and can’t use any more. Commonly known as the envelope system, this method can help you develop good budgeting habits.
Find the budgeting tool right for you
For us, we budget using our Google Keep app. Since we use google across all our devices we’ve found it a great way to access our budget in any circumstances. Of course there are also tonnes of great apps and online tools you can explore. We recently gave the pocketbook app a go to!
Or simply go old school. A pen and paper can still help you set out everything you need in a budget.
Don’t compare yourself to others
Everyone’s budget is different. We all have different expenses and goals we strive to achieve. Comparing yourself to someone else’s financial situation will just rob you of your sense of accomplishment. Keep moving forward towards your own goals.