5 Budgeting Tips To Help You Successful Make A Budget
Maybe your budget is not working, or perhaps you are looking for some budgeting tips before attempting to make a budget; whatever the reason may be, I will give you 5 budgeting tips to help you make a successful kick-ass budget!
Budgeting is an important part of personal finance because it allocates your income into the appropriate categories. Proper budgeting will allow you to pay for necessities, your wants, and even have money left over for savings. Budgeting will also allow you to pinpoint where your spending habits require attention.
For example: If you are following the 50/30/20 budgeting method, and your necessities are totaling up to more than 50% of your income then you need to downsize your lifestyle in order to accommodate that 50% allowance.
Or let’s say if your necessities are under 50%, but you only have 10% left over to save, then you need to lower your wants in order to boost that 10% to 20%.
Budgeting can be tricky, but that’s why I made this blog post to help you!
Like what you’re reading? Check out my other blog posts!
- Want to start a budget, try the common 50/30/20 budgeting method!
- Have more room in your budget by using these 20 money saving tips!
- Are you a student? Use these money saving tips to have more money in your pocket!
1. Set A Goal Using SMART
Before starting a budget, you need to set a goal for yourself. What are you expecting to get out of budgeting? Why are you doing this?
Setting goals will allow you to stay focused on the target and help you plan the necessary steps in order to get there. This will prevent you from going the wrong direction and making the wrong moves.
Consistency and dedication is key to success, but it won’t help you if your actions don’t align with your motives.
Consider using SMART when setting your goals. Make sure your goal is specific, measurable, attainable, realistic and time-bound.
- I want to save up $50,000 by the end of the year.
- My goal is to pay off my student loans within 2 years.
- I want to save up 3 to 6 months worth of expenses by March.
2. Budget Each Month For A Sinking Fund
Annual expenses/fees suck! Imagine that you’re doing great in your financial goals and then, suddenly, you get hit with a $1000 annual fee that you completely forget about.
(Here are 25 annual expenses that you should expect to look out for.)
Considering saving for a sinking fund to help you prepare for these big expenses. A sinking fund is when you set aside and save small monthly payments for a specific expense that is expected to occur later in the year.
So, let’s say that you are expecting to spend $3000 to take your family on a travel vacation to Hawaii. You would break it into monthly payments and save each month. That means you would set aside $250 per month for your upcoming vacation instead of dropping $3000 all at once.
3. Guess Low and Guess High
Your budget will not always be 100% spot on because there will always be unexpected charges or expenses that come up. This is where you need to be realistic and expect the unexpected.
It’s always better to assume that you will take home less than what you’re expecting, and assume that your expenses will be a little higher than what you’re forecasting.
Always allow your budget to have some wiggle room if in case something occurs. It’s better to be safe than to find yourself in a position where you don’t have extra cash to pay for a higher fee.
4. Use Cash? Or Use Card?
This tip really depends on your preference, but for me, I always pay with my credit card because it allows me to
- Keep track of my transactions
- Access to my transaction history online, so I don’t have to keep receipts
- Earn and collect reward points
- Build my credit and keep my credit card active
The downside of using credit cards
- Some restaurants may only take cash as payment.
- Relying on credit cards requires a strong habit of paying your balance in full and on time.
- Can entice people to make impulsive buys
- Leaves people vulnerable to credit card debt
- Open to credit card fraud
If credit cards are an issue to you then perhaps sticking to cash would be a better option. Just remember to keep the receipts os you can keep track of your spendings for your budget.
Learn more about credit cards here!
- Is having a credit card worth it?
- How is credit card interest calculated?
- What is a credit card grace period?
5. Use a Zero-Based Budget
The last tip out of this budgeting tips blog post is using a zero-based budget. When designing your budget make sure that every single dollar has a home.
If your income minus all of your expenses leaves you with some extra cash, then that’s great! But you’re not done. Consider using that extra cash and allocate it to investing, saving, or giving. That means your goal is to make sure you have $0 after allocating every dollar to the necessary category.
The point here is to be aggressive and make sure you are utilizing any leftover cash. This doesn’t mean you should utilize it by buying junk!
Allocate your money for the “Four Walls” first.
The four walls are expenses that are pure necessities in order for us to survive; that is food, shelter and utilities, basic clothing and transportation. Once these are paid off then you can fill in the rest of the holes with your income.
Budgeting Tips For Successful Budgeting CONCLUSION
These are the 5 budgeting tips to make saving easier! The 5 budgeting tips are
- Setting A Goal Using Smart
- Budget for a Sinking Fund
- Guess Low for Income and Guess High for Expenses
- Consider Sticking to Cash or Card Only
- Implement a Zero-Based Budget
QUESTION FOR YOU: Do you prefer paying for everything in cash? or by card? Do you find it to be easier to save and budget when you only pay with cash?