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Create a Personal Budget You Can Actually Stick To

It’s a good idea to have financial goals, whether big or small, long-term or short-term. We don’t all need to be gurus when it comes to managing money, but we should all at the very least have some basic skills. At the end of the day, we want the money we work so hard for to work for us, and not the other way round.

The journey to reaching our financial goals begins with budgeting, and sticking to it. Yet, the reality is that many of us are daunted by the idea of creating one, or have certain lifestyles that we’ve become accustomed to and aren’t willing to give it up yet.

Here are some small steps and tips you can take to creating a personal budget that is realistic.

Know how much money comes in, and where from

Have a good look at how much net income you have each month, and where they come from. This could be in the form of a monthly pay if you’re a salaried employee, or freelance payments if you’re in the gig economy.

Don’t forget to include less substantial but not less valid amounts that form other sources of income. This could be your annual bonuses, earnings from rental income, interests from banks and dividends from your investments.

Note your expenses — yes, even the ones you think are one-off or insignificant

Creating a personal budget can’t happen without knowing where your money goes.

Start by creating a list of all your regular expenses, be it food, phone and utility bills, transport costs, mortgage or rent, subscriptions or insurance payments.

But don’t just stop there. These are your regular, fixed expenses. For a more holistic view, you should also consider your more variable expenses such as shopping, entertainment, and the irregular stuff like buying gifts, or even unexpected medical bills. You might think that spending on a special birthday celebration this month is a one-off and won’t recur. But chances are, there will be a baby shower or a housewarming next month, a wedding to attend the following month, and a holiday that you want to go on at the end of the year.

These seemingly “unexpected” expenditures need to be included in your plan, or your budget won’t be realistic.

Assess the ins and outs honestly

The best way to work around this is to start small.

Now that you’ve put the income and expenses together, you can quickly get a basic state of affairs of your money.

Are you spending too much on shopping? Are you overindulging on holidays you can’t quite afford? Are you spending a little too much on hipster cafes and hotpot dinners?

Can you cancel subscriptions that you don’t really use? Or cut back on expensive meals or drinks, and perhaps pack meals to work once or twice a week?

It’s now time to put up a mirror, assess honestly, and find little ways of tweaking how you spend and being more frugal.

For instance, if you’re spending too much on food, then perhaps you might want to consider looking out for food promotions or apps that offer deals and plan your meals around these offers.

If holidays are your kryptonite, then you could consider booking your flights and hotels in advance or during promotions to get the best deals. You may even want to consider travelling to countries closer by where possible.

It’s dangerous to spend beyond our means. At some point, “YOLO” catches up with all of us and you could find yourself caught in snowballing debt that only puts you further away from your financial goals.

Based on these little adjustments, you can then start to set a realistic savings goal that you can actually reach.

Adopt a budgeting strategy

After having a better idea of your monthly finances, it’s time to make a plan to help you reach your goal.

There are many different budgeting plans out there. They’re not one-size-fits-all, so it’s about finding what suits your preferences and personality best and works best for you in this season.

The 50/30/20 rule is a fairly popular one that many adopt. It’s a basic method that divides your money into ratios: needs, wants, and savings. Based on this method, 50% of your money is spent on absolute necessities; 30% on wants; and 20% is stashed away.

There’s also the envelope system, where you come up with different spending categories and divide your money amongst them. Then, you determine how much of your money you’ll allow to be spent on each category, then put that amount into the envelope for that category. Only that amount will be available for that category, nothing more. Of course, the actual envelope, in today’s context, can be symbolic.

Yet another budgeting method is to “budget-to-zero”, or do zero-based budgeting. Here, your income minus expenses should add up to nothing, hence the “zero”. When you do this, you put every dollar you have to work and you certainly don’t spend everything. Every cent has a purpose and job, be it expenses, savings, or investment.

Whichever method you choose, the general idea is to help you become more aware of your finances and instill discipline in your lifestyle. If you fail to plan, you plan to fail.

Start small, but stay the course

If you haven’t been saving anything at all, don’t worry. It’s never too late to start, and even a seemingly small sum of saving $100 a month is a good start. If you’ve already been saving a little, then challenge yourself to up the ante to save 10% more.

Alternatively, you can aim to simply start spending less than what you earn.

Making these small adjustments and sticking to a budget can be a little hard to get used to at the start. There are many finance and budgeting apps out there that can help you on your way, and you can read about some of them (including Planner Bee!) here.

It’s important to know your reason for setting a budget in the first place. Is it to get out of debt or have a bit more disposable income? When you know why you’re saving, it’ll be a little easier to adjust your lifestyle. Remind yourself of these reasons especially when you get frustrated or feel unmotivated.

Be sure to get some support from your peers (especially if they’re your food or holiday buddies) and stay accountable. If you realise that you aren’t hitting your goals, it’s no reason to give up and abandon your plans.  Simply re-adjust your goals to be more attainable. The key: don’t bite off more than you can chew. And just like dieting, don’t let one bad meal (or in this case, one less-than-ideal financial decision) derail you for good.

Sticking to a budget may be daunting at first, but this is a guarantee: your future self will thank you.

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