Budgeting helps create financial stability, by tracking expenses and following a plan, a budget makes it easier to pay bills on time and save for major expenses such as a car, travel or a home etc.
Tips on budgeting:
1. Estimate your income
It is close to impossible to set a budget without knowing how much money you’ll have coming in. Ensure you add up your regular income as well as any part-time work, government benefits, dividends etc.
2. Estimate expenses
The best way to do this is to go through your bank statement and categorize your expenses like housing, utilities, groceries, eating out, health care, travel and spending money etc.
3. Every month is different
When doing step 2 you will need to consider that every month is different, some months you will have to budget for birthdays, Christmas, car maintenance etc. Make this less stressful by pulling up the calendar and preparing for these occasions while creating your budget.
4. Set a spending limit
The money you have left after your expenses is your spending and savings money. Make a plan for your spending money, this will help you to see where it goes and keep you within your spending limit.
5. Set your savings goal
Once you know how much money you have left over after expenses you can set your savings goal and the rest can be spending money.
6. Create a buffer in your budget
This means putting a small amount of money aside for unexpected items throughout the month, that way you can cover it without having to take money away from somewhere else.
7. Use a budgeting app
There are several apps that can help you setup your budgets, such as Goodbudget, Everydollar, Nerdwallet, WeMoney etc. Budgeting can take a few months to get the hang of therefore these apps can be very helpful.
8. Make budgeting easier
You can do this by having separate bank accounts, for example you could have a transaction account for bills, a transaction account for spending and a higher interest savings account. You are then able to automate your budget by setting up a regular transfer to your savings account on pay day. You can also set up direct debits for your bills.
9. Use the 50/30/20 budget rule
This is a simple way to manage your budget effectively, you divide your money after tax into three spending categories, 50% for needs, 30% for wants & 20% for savings.
The above tips will help you ensure you are not spending more than you are earning and allows you to plan for short-term and long-term expenses. Overall, it will support you in keeping your finances in order.