While some people are awesome at managing their finances, there are plenty of people who struggle to budget effectively.
If you are someone who struggles to successfully manage your finances, don’t fret.
There are some simple budgeting techniques that everyone can employ to ensure they manage their money effectively.
STEP 1: Know your expenses
It is impossible to budget effectively when you don’t know what your regular outgoings and expenses are. Before you start to manage your finances successfully, you have to first know exactly how much money you are making and how much money you are spending each pay cycle. Write a list with every expense you incur on a regular basis, including:
- Board/rent/mortgage repayments
- Travel costs
- Food costs
- Electricity/gas costs
- Internet, phone
- Socialising, clothes
Once you know what you are spending each month, you can identify potential areas where you can cut back.
STEP 2: Build a budget
These days there are plenty of budgeting apps that you can download to help you create a useable and manageable budget. However, if technology isn’t your friend, simply create your budget in an excel document or in a notebook. To build a successful budget, you have to write down exactly how much you will earn each month and then tally all the expenses you have. From there, you can divide whatever money you might have left over into different categories, including ‘savings’, ‘socialising’, ‘entertainment’ and ‘product purchases’. A good budget should show you how much money you have to spend each month on various items and be updated regularly to ensure you stick to your self-imposed budget.
STEP 3: Employ different transaction buckets
If you know you are prone to spending whatever money is in your bank account each month, it may be worth opening several different transaction accounts. In each account you can put a certain amount of money that is designated for certain things – like ‘socialising’ or ‘household expenses’. If you only put the money you are willing to spend on a certain item into its respective transaction account (or bucket), you can effectively stop yourself from spending more than you planned. It is also a good idea to open a savings account that does not come with an EFTPOS card. If you can’t easily access your savings via an ATM, you will be less inclined to spend the money.
STEP 4: Get yourself a budget monitor
In addition to opening different transaction accounts to manage your various expenses, you also might like to ask a good family member or friend to become your budget bodyguard. As your budget bodyguard, they will be responsible for keeping you on track and holding you accountable if you try to outspend your means. Having a parent or good friend look at your monthly financial statements will make sure you don’t try to cheat your budget.
At the end of the day, if you want to manage your finances successfully, you need to diligent and determined not to spend your money unnecessarily.