Budgeting can be a difficult task. It may seem easy in theory, but the reality of it is much different as it requires goal setting and behaviour change.
With this article, I will show you how to budget and give you some tips on how to start saving money.
You will also learn about your financial goals and what you're willing to sacrifice to get there. Budgeting might not always be easy, but if you stick with these budgeting tips and make adjustments as necessary, then by the end of this article, we'll have successfully helped you get through it!
What is Budgeting?
Before we start with the budgeting tips its good to first know what is budgeting?
Budgeting means estimating or following one's income or expenditure for a predetermined period of time, for example, a month or a year.
We use the word 'budget' for money and cash flow planning. The budget is a vital part of business operations since it allows us to predict how much revenue will be generated in the coming months and, therefore, plan future investments in assets such as buildings or machinery. It will also allow you to predict future cash flow and, in turn, decide on how much should be spent or invested right now.
Individuals also use budgets as a personal financial management tool. Personal budgets allow us to have an idea of what our expenses are and what we can afford.
They can be a useful tool for dealing with any debt repayment such as credit card debt, and student loans, improving your credit score and saving for a down payment.
Budgeting is really essential if you want to develop good financial health.
Benefits of Budgeting
There are many benefits to budgeting. Some of the more obvious benefits include:
Keeping a budget allows you to know how much money is going into your account every month. It also allows you to keep track of what exactly you are spending your money on and how much money you have leftover for other things.
This makes it easier when someone asks, 'where did all my money go?' It also makes it easier when you want to save money for something special.
Now you understand what budgeting is let's get to the beginner budgeting tips including budgeting tips everyone should know.
So now you know what a budget is and the benefits, let's get to the tips that will help you on your journey!
1) Set Clear Budget Goals
Set a clear goal. The more detailed, the better. By setting goals, you can reduce your spending on unnecessary purchases and save up for larger important items.
For example, if you want to go abroad on vacation in the summertime but don't have much money set aside for it, then create a vacation budget! You could choose to use a goal model like GROW to help you.
Are there any vacations that you want to go on? Is it an international trip, or can you travel within your state or country? How much will you need to pay for this vacation? When do you plan on saving up for this vacation so that you have enough money saved by the time summer comes around? - see what I mean about having clear goals, be specific and give yourself lots of detail to convince yourself to stick to the goal.
Don't be too hard on yourself when starting a budget. It will take some time getting used to, and even if you aren't perfect at it from the start, don't get down on yourself! Keep trying and stay motivated!
2) Use Budgeting Apps To Make Budgeting Effortless
Cleo is an AI-based budgeting app that offers intelligent insights into your spending patterns, trends and budgets, all via text message or Facebook Messenger.
With Cleo, you can set up a daily, weekly or monthly budget with just one click. You can also check your direct debits and view the balance of your account.
Check out our latest transactions to see where we spend most of our money!
Related Article: Money Saving Apps
3) Try Living on a Tight Budget
For a month or two. You may find that you save more money when your budget is super tight, and once you have saved up enough funds, you can loosen the reigns on your budget!
If possible, don't tell anyone outside of the people closest to you about what you are doing with your budget. If no one knows, they aren't going to ask. If they don't know and you succeed, then it will be even more of a great feeling!
Many people have had success with a no spend month, which could be a good detox for when you start living on a budget. It will help you decide what you really miss and want to prioritise spending your money on.
Find out More: Living on a budget
4) Start With Easy To Manage Expenses
Don't start by trying to budget every single one of your expenses when you first begin budgeting! Start with the easy ones that are easier to manage, and then add more items into your monthly budget from there as you get used to the process.
Make sure you spend a few weeks figuring out where you stand on your expenses before adding certain categories because it will be easier for you to make adjustments and know how much you are spending in each section.
Don't be too hard on yourself if you can't get used to budgeting overnight. It takes time! Being patient with yourself is essential.
Find out more: Living Below Your Means
5) Differentiate Between Needs and Wants
To not overspend, you need to know what your needs and wants are.
This is one of the hardest steps because it's so easy to buy something that we think we want, only to realise after some time that we don't really use it or need it all that much.
If you can differentiate between items such as this, you can determine which items are more important to you and which ones aren't so that when a budget is created, unnecessary spending can be eliminated.
If you decide that it's okay to have several 'wants' as long as your budget allows for it on certain days of the week, then go ahead! For example, if a student wants to eat at the restaurants on campus and have a nice dinner out with friends one night, then it's okay for them to spend the money and enjoy themselves because they are different categories of needs and want.
When you understand what your needs and wants are, you can create budgeting goals based on these two things and stick to them to manage your money!
Related article: 7 ways to stop impulsive and compulsive spending
6) Automate your Savings Plan
If you have a steady income, it is recommended that you automate your savings plan so that once you make your budgeting goals for the month, investments are automated, and all of the money goes straight into an account!
Automation works best with a direct deposit from your paycheck to your bank account to determine how much you need to put into savings each month.
When you automate your savings, it makes you more accountable for your spending and allows you to save more money than if you were to save from your checking account manually.
7) Create a Realistic Monthly Budget
Once you know your needs and decide what you want to spend your money on, it's time to create a realistic budget!
Creating a monthly budget is easy with Cleo because all of your expenses are in one place. You can add any expense into this category, and if it is an expense with multiple payments, you can set how much you want to be put into your budget each time. You also have the option to set a savings goal on Cleo, which can help if you are trying to save up for something in particular!
The best way to figure out how much you should be spending on certain items is by looking at past receipts or through talking to someone whose budget you admire. By looking at past expenses, it is easier to see how much you've actually been spending on that item over the course of a month and, if necessary, adjust your monthly budget to get yourself under control when it comes to spending certain amounts!
Give yourself some wiggle room so that when something happens, or maybe you want to spend more during the month, you can do so, but don't create a budget that is too tight on you because it will be tough to follow through with.
Figure out what your income and expenses are
You already know what your needs and wants are, so now it's time to figure out how much of those needs and wants you can afford each month.
Do you understand how much money is coming into your household? What do you spend money on every month? Could you keep track of it?
Create a plan for the year
Once you know your needs and wants, create a monthly budget that allows you to maintain yourself throughout the year.
Related article: How to Do Food Shopping on a Budget
8) Make a List of all of Your Expenses
Expenses and savings, and determine what you can spend on different things throughout the year. If you have leftover money at the end of the month, make more room in your budget for that, so it doesn't leave as soon as you get it!
It is a good idea to create this plan by tracking everything down to the last dollar. When something is in writing, it is a lot more difficult to change your mind. Even if you don't follow this budgeting plan 100% throughout the year, stick with it as much as possible! It will teach you how to save up for what you want and save money to reach your goals.
When looking at your energy bills this useful article on energy saving tips might come in handy.
9) Use Online Banking
Online banking allows you to put limits on your spending so that when you get ready to make a purchase, the money isn't there, and it will be harder to spend!
When you decide what your budgeting goals will be, set up a limit for yourself online to prevent yourself from overspending! This is perfect if you know you are going to the mall or planning on making a big purchase. Setting up limits for yourself online will make it harder for you to spend money, and once your account meets that limit, Cleo will notify you of how much is left!
I want your budgeting goals to stick as best as possible, automate everything! By automating everything, it is harder to go against what you set up.
Every time your paycheck gets deposited into your account, automatic payments will be made right away to ensure that you have everything covered for the month and there isn't a single hole in the budget! You can also automate savings so that money comes straight from your paycheck!
10) Review the previous month and compare it to this one
How much have you spent on things that aren't important?
The best way to find out how you are doing with your budget is by reviewing the previous month and comparing it to this one. If you want, look at two months before this one as well!
By looking at the past and seeing what has changed with your income and expenses, it will be easier for you to see where you can cut and what you can spend more on!
Look at how much money you spent on items that aren't important such as food, clothes, technology, etc. If you find out that these things are taking up a lot of your budget, go ahead and cut them down! Try to take away one thing that is just wasting your money and see if it makes a difference!
Budgeting is fun if you take the time to enjoy it and figure out how to do it right. Just remember- everything is in moderation, so even though you might want to save every penny that comes your way, don't ever forget about having fun!!
By following these tips, you will adjust and create your own budgeting tactics and rules that best suit you! Budgeting is fun if you take the time to enjoy it and figure out how to do it right. Just remember- everything is in moderation, so even though you might want to save every penny that comes your way, don't ever forget about having fun!!!
11) Pay Yourself First
When you get paid, take your paycheck and put it towards your savings account. This way, the money will be harder to get to during the month, and when you do withdraw it, you'll realize how much of a "fat" paycheck you really got!
If you want to make sure that you save up as much money as possible each month, you should pay yourself first! If you are getting paid on the 1st, but some of your money into savings account before you even begin to spend it—that way, when the month is over, and all of your bills are paid off. There will be something left over for saving!
This method can be hard initially, but once you get used to it, your savings account will be bigger than ever with any extra change that you have leftover!
Do the same thing with a credit card! Pay yourself first so that at the end of the month, when all of your bills are paid off, you'll have something left over to save. If you don't pay yourself first, you'll be too focused on paying your bills off that you'll forget about saving!
12) Try a Simple Budget like the 50/30/20 Budget
You can do your budgeting in many different ways, but you should try the 50/30/20 Budget. This means you budget out all of the basics for yourself and divide them into three budget categories.
By doing this, you'll get to save up for big purchases and be able to save as much money as possible!
The best part about the 50/30/20 Budget is that it's effortless! You take your monthly income and then divide it by 3. This will give you three chunks of money to do with whatever you want. Remember this next tip if you are having a hard time keeping track of what each chunk of money should be used for!
Remember what each chunk of money is for
This may seem a bit obvious, but when you are doing your budget, it's easy to forget that the 50/30/20 Budget only focuses on three ways of spending money. These three ways are Income, Needs and Wants. Once you get used to using this method in your budget, you'll find it much easier to save up a good amount of money every month!
Make sure that your income is going into the Income section of your budget. That way, you'll have enough money coming in to pay off all of your bills each month! Once those are paid off, and there is leftover cash, put the remaining 30% towards your Needs, which are the necessities that you need to pay off each month. Now everything else is left over for Wants, the things you want but don't really need.
Take a look at your past purchases and see where you spent most of your money during the month. Once you've figured out how much money went towards unnecessary items, try to cut them out and put the extra cash towards your monthly savings.
Take responsibility for yourself.
Now that you have your own budgeting tactics don't ever forget that you are in control of your own money! Take care of it, take pride in what you do with it, and remember that it's all about moderation.
Want to know more? Check out 50/30/20 Budget full article including FREE budget template
13) Make sure to Compare Prices to cut down bills and increase your saving potential!
It is best to make sure you are on the right plan for set bills like car insurance, house insurance, and gas-electric.
Make a note in your diary when you are out of a contract to do a comparison shop to make sure you are on the best-priced plan.
Make sure to compare prices for all your bills to cut down on unnecessary spending!
Tip: When comparing prices, make sure you are comparing like with like. For instance, a supermarket may offer cheaper fruit, but their meat is more expensive, so it's best not to look at the price and think that shopping there will save you money in the long run!
14) Do a Savings Challenge
Savings challenges can make budgeting fun, and if you are a competitive type of person, you might find a savings challenge a motivating way to get started with your budgeting journey.
Remember, it's important to keep track of what you are saving every month and increase it by a little bit each week or month.
Try adding in an incentive for yourself to know that your hard work will be worth something.
For example, maybe if you save up $100 this month, then you'll buy yourself a new pair of shoes. If you are trying to save up for something bigger, like a holiday, then maybe you'll buy yourself a nice meal out when you reach your goal!
Some popular Savings challenges are:
- Penny Challenge
- 10k Savings challenge
15) Make an Emergency Fund
It's essential to have an emergency fund for when things go wrong. It helps you plan for unexpected expenses.
This is a special fund where you put aside money to use in case of emergencies. Emergencies/ unexpected expenses can be anything from getting your clothes dirty, getting home late due to bad weather or maybe even if the dog needs an operation! Any leftover money at the end of the month is great to add to your emergency fund. Once you've got an emergency fund sorted out, you'll feel more at ease knowing that if something unexpected happens, you have a little bit of money set aside just in case!
Tip: Make sure that it's easy for yourself to access your emergency account so that if there comes a time when you need to spend it, it is all ready to go and accessible!
Budgeting Tips: Final Words
As you can see, a budget is an essential tool for managing your money. It's also the most sensible method of saving money that is out there!
With just a little bit of work, you'll be able to get your finances sorted in no time.
Which budgeting tips will you use for saving money? Let me know in the comments below!