Spending is a natural result of making money. We work hard to be able to earn enough to lead a life of comfort and luxury. But, on the other hand, unrestricted expenditure can lead to you running out of cash in the middle of the month which is never a good thing. A proper budget plan needs to be followed to ensure seamless cash flow so that money earned and spent are evenly balanced. A budget allows you to save for the future while spending adequately without wastage.
Let us now go ahead and check out the 6 simple steps to building a better budget:
- Prioritization of purchases: It is important to make a list of the things you critically need and the things you simply wish to buy for fun/luxury. Once the list is made you can make calculations and find out if after buying the critical items, you can afford the ‘comfort’ things or if you should save up for the future. Determining what you need and don’t need, what’s proper spending and what’s a waste of money are all important deductions towards a good budget plan.
- Be realistic: While making a budget, don’t rush through the process. Think and decide on the things you can get rid of in your monthly schedule/expenditure but be wary about not subtracting something that forms an essential part of your life. In the end, such a step won’t bear any fruits as far as saving is concerned and as you inevitably resume it, your budget will go haywire. Whatever decisions you make need to be precise and honest as a budget is all about discipline and sticking to the plan.
- Track your monthly expenditure: Write down and keep a record of your monthly expenses from rent, utilities, insurance to gas, gas bills and internet services, etc. Look for and track every single expense, big or small, and sum up to ensure that the income is more than the spending. Accordingly, create a budget or modify an existing one.
- Count on the uncertainties: Remember that no matter how well you plan, there will always be unexpected situations which will take you above your budget. These could be anything from holiday gifts to charitable trusts to medical emergencies. Therefore, it’s best to make a conservative budget so that the unexpected do not cause major hiccups to your overall plan.
- Form a paper-money mindset: Stop using credit cards till your budget is under control. Plastic money, though helpful, can be a major harassment for those living on a budget, especially with hidden interests and extras. Regulate your budget and when you see that you have done all that is necessary and it’s working, you may use credit cards again, albeit cautiously. This sort of tactic, allows you to spend only the budget money and nothing extra that could derail your budget.
- Use available technology: Nowadays, there are many apps and programs which help us to create a budget with the press of a few buttons. Some great examples are Quicken and Moneydance which have etched a place among businessmen and employees alike to form budgets. Whether you make a card transaction, write a check or make a cash payment, you are prompted to enter them in the relevant app and the record stays with you. This not only helps you in maintaining a clear budget but also helps to extrapolate the monthly expenditure for the future.
To conclude this article, budget constraints are always present even with our best efforts and plans. But with efficient planning and diligence, it is actually possible to create a framework within which we can create an accurate and effective budget, citing all possibilities. Therefore, the above steps are guidelines to lead a good lifestyle and also save up for your future.