Most of us start the new year with goals and resolutions. As the year proceeds, we tend to get busy in our day to day lives and forget our resolutions. Budgeting is one of them. It is not a fun activity to do. Here are a few tips on how to stay on budget and save money.
Most of the activities that are required for success are boring and needs to be done repetitively.
We cannot create a budget in one month and skip the next month. Budget is a plan for your money and a clear picture of how you are going to use your money.
How to stay on budget and save money
How to create a budget
There are many ways to create a budget but a realistic and simple budget can do wonders to your financial health. You can create a budget as you like. There are a few ways to create a budget.
1. Traditional Budgeting system
Traditional budgeting consists of allocating the money to all the expenses and then saving what is left. Problem with this one is that you never have any money left to save. It is a good idea if you are very strict with your money rules.
2. Reverse Budgeting
In this method, you will save towards your saving goal and then you spend what is left after. This budget method is better as here you pay yourself first then you start with all other needs to spend. Reverse budgeting is good to budget the easy way and saves money every month.
It is like paying yourself first and then arranging the leftover money according to your needs.
3. Balanced Money Formula
Balanced money formula is a budget planning framework outlined by Elizabeth Warren and Amelia Warren Tyagi in the book ‘ All your Worth ‘. According to this formula,
50 % of your income should go for your needs
30% for your wants and no less than
20 % into savings
This will urge you to keep your needs and wants under control so that you will have at least 20% of your after-tax income to save.
Which budget system is for you?
It really depends on you which one you like. Or you may try with each budget system and see what works for you and your household. You may find a midway between two systems.
Now, it will be easy to figure out the budget system. And if you are already budgeting but find it difficult to stick with the budget, try these hacks on how to stay on budget. I am sure you will find this helpful.
1. Track your spending
To start creating a budget, it is important to know where your money is going. Before cutting your spending and starting budget, track your spending for a month or two.
When you know your spending habits, it becomes easy to cut the spending and stick to spending on only needed items.
2. Create an emergency fund
Building an emergency fund helps in giving you cushion against any emergency like we are facing now. There is uncertainty everywhere and we don’t know when things will be better.
Also, an emergency fund helps in sticking to a budget by providing you security if any emergency arises. A robust emergency fund saves you from taking money out from your credit cards.
3. Do it on the same date
This one has been so helpful in keeping me motivated each month. I always make it sure to create a budget on the same date. If I cannot do it on a particular day for some reason, I just do it the next day.
Keep a reminder on a calendar which sits on your table. And out a reminder on your phone also.
4. Pay yourself first
Paying yourself first means saving to your account first. A growing savings account is a great motivation when you want to budget. Paying yourself first will always prompt you to sit to create a budget.
Make this one automated. And if after creating a budget for the set month, you are left with more money, save that also. I don’t know about you, but saving money makes me happy.
5. Keep it simple
One more aspect of a functional budget is its simplicity. If you will make it complicated, you will dread working on it. Simple things are easy to manage and working is also easy.
6. Make some saving goals
Saving goals help you to keep motivated. Keep your saving goals in front of your eyes. It will motivate you to stay on budget. This is the way you will be able to save money.
7. Assign some money for fun activities
You will get frustrated with your budget easily if you will not keep the money for fun activities. Fun and entertainment are necessary for keeping you motivated.
You may be tempted to stop budgeting if you will not entertain yourself.
8. Automate as much as possible
This one is the real deal-breaker. It saves you time and you have to put less effort into your budget. Automate your savings even before it hit your bank account. Also, you can automate debt repayments, bill payments, savings etc. These will make budget less complicated.
There are many apps and even bank accounts that can help you in this.
9. Record your spending
Record your spending each week. This will give a clear idea if you are going on track with your budget. Moreover, you can make any changes in your spending habits if required.
10. Keep one spending account
You may have different bank accounts but try to use only one bank account for all the spending. Pay everything like mortgage, insurance, grocery school fees etc from one account only. Consolidating your spending will help you keep an eye on how much you are spending.
11. Delete all the shopping apps
You know the biggest hurdle in sticking to a budget is the temptation to buy those items you don’t need. I have one of my friend who is always looking for buying things. Ask her about anything, she knows about every big store and online shopping portals.
To save yourself, delete all the shopping apps. Believe me, this will save you from impulse buying and saves a lot of money.
Whenever I have some heated arguments with my husband, I go for shopping😉. I spend money just to make him jealous and this makes me happy.
12. Keep your budget realistic
Don’t go overboard and try to cut most of the spending. If you love to go to outings every weekend but you are not allocating any money for this activity, you will throw in the towel easily.
Keep it realistic and start cutting unnecessary spending one by one so that you will not feel the absence of entertainment.
13. Live below your means
You can either save money by earning more or by saving whatever you have. Instead of living a life king size and buying everything you want, try to live below your means. You don’t need to have a lot of flashy things to show people, you just need to live a fulfilling life. This will help you in sticking to your budget.
If you are having a good amount of money now, keep it for the future. Never spend all of your money once you get. Living below your means and earning money wherever possible is the key to save money.
14. Think positively about future
If you want to save for the future, you should be optimistic about your future. Think about it. If you think you will die tomorrow, you will spend everything today. You would love to do everything today. But if you think you are going to live say another 60 years what would you do? You will definitely like to save for your those years when you will not be working anymore.
But you would love to live a comfortable life. It is up to you what age you want to retire and want to live comfortably after that. I am planning to retire in the next five years. And I am optimistic about that. I have planned for those years.
15. Delay the gratification
You are so desperate to buy that nice piece of jewellery that you cannot resist the temptation. If that temptation will give you happiness for say a week and then diminish, then there is no value in buying that. As a woman, I can tell you from experience that a jewellery piece gives happiness for only a few days. Or few times when you wear them. After that, it has no value in terms of money as well as happiness.
It is only for immediate gratification. ( If it makes you happy for a long time, go for it.). We all have something that makes us happy for a long time. For me it is clothes. If I buy a dress, it makes me happy for at least two years. But thankfully it is not a very expensive thing to do. When you delay the gratification and urgency to buy something now, after a few days the urge will diminish. Delaying the gratification now will give your savings a boost and help you stick to the budget.
- 21 tips to save money on a very tight budget
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