Budgeting Tips


Wise Budgeting Tips Consumers Should Try

We all want to spend less, but that goal seems unreachable. Most people blame their income for not being able to save money. However, a closer look at their expenses says otherwise. A lot of people spend more than they need. Overspending is one of the chief reasons professionals cannot deal with emergency expense without borrowing or selling something.

Know why you’re budgeting.

It’s hard to do something when you don’t know why you’re doing it. Understand that the reason for keeping a budget is you want to be responsible over your finances. Or maybe you want to have more savings. Perhaps you want to control how you spend your money so you won’t have to feel guilty over impulsive shopping.

Start tracking your spending.

Keep a journal of your daily expenditures. Track every expense, from bus fares to the money you paid for that bagel. Review your journal after a week. Look at where much of your money goes to. Think whether it was worth it. Did you buy more snacks than you needed? Did you eat out more than you needed? Did you spend too much on movies?

Listing down your expenses is an easy way of monitoring where your money goes and whether your spending makes sense. You can then decide where you can cut back.

Identify where much of your money goes.

Most of us overspend on only a few things — food, clothes, holidays, or entertainment. Don’t stop at determining which you overspend on. Work on devising plans to reduce your expenditure on these things. If you’re spending too much on food, devise ways you can curb grocery shopping expenses. Or reduce the number of times you eat at restaurants. Are you buying more clothes than you need? Maybe you can limit yourself to one new article a month.

Keep envelopes.

This is a simple way to allocate money to your different expenses. This method is a no-brainer. You won’t have to go to the bank and open new accounts. Simply label the envelopes different categories, like grocery, eating out, clothes, etc. Set a reasonable budget for each, and put the money in the envelopes. For each category, you will only spend the amount available in the envelope for a particular month. If you’ve used up funds for entertainment after two weekends, you will have to wait till next month until you refill that envelope. This method requires a lot of discipline.

Open different checking accounts.

If keeping money in separate envelopes doesn’t kill your urge to overspend, maybe you should try this option. It’s harder to withdraw money through the ATM than to take it out of an envelope. But it’s actually just another step away from the envelopes. Open separate checking accounts for monthly bills, mortgage, holidays, and living expenses. It’s harder to spend money when you don’t see it right away.

Use your credit or debit card.

People have demonized credit cards too much. The truth is, it’s the spender’s fault, not the credit cards’. You’re going to overspend anyway whether you have a credit card or not. It all boils down to your attitude towards handling your expenses. The good thing about plastic is you can monitor your spending habits. You can log in to your banking account online and see how much you’ve been spending each month.

Make a monthly estimate.

After mapping your expenses, find out where you can save. Create a budget using this new information. Determine how much you can save from your monthly income. Take this amount away from your paycheck and put it in the bank. Spend the rest of the money. Saving first allows you to actually save money. It’s harder to save after spending your income on monthly expenses, because there’s a greater chance that you’d spend everything. Again, it’s easy to spend money on hand.

Allocate half of your income to necessities.

Necessities include food, monthly dues, mortgage, and so on. Much of your budget goes to the things you can’t survive without. Break the other half of your income into two. The first part will be your savings. Spend the other part on recreation, clothes, and other things.

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