How often do you get to the end of the month with no cash left and wonder where it all went and how you’ll pay the rent? It can be easy to fall into the trap of spending all you have in your bank account, but by using a budget you can get organised and avoid that sinking feeling of not know how to pay for the next the phone bill or electricity account.
In simplistic terms, a budget is an easy way of keeping track of what you are spending and making sure that you have enough money to meet your commitments.
The more exciting part of setting and using a budget is where you can identify unnecessary spending that you can instead use as ‘extra money‘ to reach your goals sooner. Imagine being able to find an extra $50 a week that you would otherwise waste, that you can put it towards travelling overseas, investing in property or whatever you’ve got your heart set on.
How to Budget - Part One
If you have a limited income and goals that you need money for, a budget is very important. Here is a guide to getting started with budgeting:
- List all your fixed costs – the regular things that you must pay for like rent, phone, insurance, groceries, car rego, petrol etc.
- List all your non-fixed costs – may include meals at restaurants, new clothes etc.
- List those out-of-the-blue costs that happen every now and again like holidays, car repairs and dentist fees etc.
Part Two: Putting it into practice
- For one month, list everything you actually spend. This sounds boring and painful, but doing this will give you a clear understanding of what you actually spend your money on.
Many people are surprised at how much they spend on little things.
- Identify areas of spending where you can cut back in order to save more.
- Finally, work on sticking to your new budget.
When to budget
Any time is a great time to start budgeting. The sooner you create a budget and start following a savings plan, the sooner you’ll have control over your money, instead of the reverse. Creating budgets can be particularly helpful when you reach important milestones in your life, like:
- Getting your first job
- Getting a new job
- Buying a car
- Undertaking studies
- Planning a holiday
- Moving out of home
- Buying a home
- Getting married
- Getting rid of debt
- Having children
Put money aside for your goals and investments and open up worlds of opportunities. Rather than relying on credit to get you where you want to go (which ends up costing you more… see ‘Credit Cards‘), if you’ve got savings behind you, you could say ‘yes‘ to more opportunities.
Investing regularly is a fantastic way of achieving your personal goals. One of the big advantages of starting when you are young is using the power of compounding – getting interest on your interest!