There are a lot of reasons that may prevent us from budgeting. Perhaps you feel that you are doing fine spending-wise and a budget just does not seem that relevant. Your income might be on the low side – so why budget what little you have? Or you could be vaguely aware of how important making a budget is, but the time and effort it will take to stick to it puts you off.
If you are new to budgeting, take advantage of budgeting apps. You can easily find a quality, user-friendly one for free. Consider the range of budgeting techniques too. For instance, the envelope system gets you to withdraw your budget and put the cash in labelled envelopes for spending. It sounds a little primitive with everything finance being done online and with cards now, but hear us out. It can be helpful if you need a visual reminder of your expenses. It is also easy to move the cash around to different categories depending on how your month goes and what emergency expenses you rack up.
If you are currently not doing daily budgeting, here are some reasons why you should.
Better manage your expenses
Rather than focusing on the ‘now’ appeal, a budget gets you to consider the long-term practicality of purchases and pinpoint which expenses you can cut down on. You might be practising bad spending habits and not even be aware of them. It might be useful to start off with listing your fixed expenses, then planning for variable expenses. For example, are you managing a personal or student loan? Account for it in your budget. Do not forget to set aside money for one-off expenses too like medical check-ups.
Transactions have become smoother than ever with the convenience of credit cards – but it can also encourage you to unknowingly spend more than you can and end up with a credit card debt. So keep tracking your expenses and be disciplined with spending. If you are struggling with debt, start budgeting now and consider debt consolidation.
Be a better saver
Besides helping you to put money aside for emergencies and retirement, it will give you incentive for applying more money-saving tips to your daily routine and lifestyle. You could find a more affordable phone plan, or be inspired to cook more and take on DIY projects.
Achieve your long-term goals
It always helps to put things in perspective by budgeting for the long-term. Keeping the big goals in mind – be it a new car or a concert – curbs impulse buys and keeps you motivated to save. It is not about making big sacrifices in one shot. Think little compromises that add up. For example, it would not hurt to miss out on a few restaurant dinners a month and opt for a cosy get-together at home. This can save up for tickets for an overseas trip by the time the holidays roll around.
The golden rule of budgeting: Make it flexible
The common misconception about budgeting is that it is restrictive and makes life less enjoyable. Far from it – the long-term rewards it achieves make it worthwhile and in reality, it is not as confining as you think.
Make your budget rewarding by setting aside money for fun. Also, adjust your plan as you go along. Imagine that it is nearing the end of the month, entertainment expenses are running dangerously low but you really want to catch that outdoor movie showing or music gig. There is no reason you should forego it, just arrange your budget so that it can accommodate that. Exercise a shrewd eye and move funds over from other areas of your budget. Our tip? Create a separate budget pool for extra expenses – kind of like your own money reserve.
You might be tempted to splurge the surplus, so calculate how much this reserve adds up to if you save it in whole month after month – knowing the ultimate figure (and the dream getaway it could finance) can prevent you from digging into the funds unnecessarily.