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Effective Budgeting Strategies

Using the term “budgeting” can sometimes be off-putting because people think it’s a way to deprive them of something. Budgeting is actually a way to find out how much money you need for living expenses so that you can control how your pay is used and have something to set aside. Here are a few effective budgeting strategies you can use to meet your financial goals.

Tip #1: Record everything

You may list down your essential expenses like utility bills and insurance payments, but do you also record the smaller ones, like the little purchases at the convenience store or even your vending machine jaunts? Remember, these seemingly trivial expenses do add up, and they can mess up your budget. The trick is to keep all your receipts and write everything down, so that when you work on your budget, it’s accurate, down to the last cent, allowing you to better manage how your hard-earned income is spent.

Tip #2: Select your platform

If your finances are really simple, then maybe a pencil and paper are all you need to plan your expenses. However, if your budget is a bit more involved, you’d need a platform that can make things easier for you. For instance, you can use spreadsheets to map out your budget from scratch or download templates for something more specific.

You can also look for online personal finance services like ClearCheckbook and Money Strands or any other similar websites. Such services have useful budgeting features like generating a spending plan and chequebook balancing.

Tip #3: Spend less than you earn

All your efforts at budgeting would be ineffective if your expenses are larger than your income. What you need to do is spend less than what you earn. Take note that if you use up more than your income, you will accumulate debt. If your income and expenses are pretty much equal, you need to spend less or earn even more. If this is the case, go for spending less it’s much easier than getting a second job. Spending less than your income allows you to accumulate wealth.

Tip #4: Pay yourself first

Think of putting money in savings like a bill to be paid to yourself. Indicate the savings as part of your budget and withdraw it before spending your funds on bills, groceries or any other expenses. See to it that you deposit your savings budget immediately in a separate account so that you won’t mistakenly spend it. If possible, set up a way for your savings to be deducted automatically from your salary. You won’t even realise you’re accumulating wealth.

Tip #5: Reduce entertainment expenses

There’s probably an allotment for “entertainment” in your budget, which could cover expenses like watching a movie, going on dates or even buying video games. Play close attention to these costs because it might cause you to overspend. To reduce entertainment expenses, consider:

  • Getting bundled packages for phone, television and internet service.
  • Borrowing audio books, movies and even video games from public libraries.
  • Visiting free art exhibits or movie festivals for dates.

Tip #6: Prepare your own meals

It’s more expensive to eat out than to prepare your own meals. Consider that having a meal for two people at a mid-priced restaurant would cost around AU$77 to AU$80. Groceries for two people, on the other hand, would cost around AU$150 to AU$200 per week. You can eat at inexpensive restaurant (i.e. fast food) to save on costs, but that’s not good for your health. To save money on food, learn to cook healthy meals. That way, you cut down dining out costs and possible doctor visits.

Tip #7: Overestimate when allotting funds

If you’ve been budgeting for a while, then you probably know that many expenses have variable costs due to fluctuating prices. To prepare your budget for this unpredictability, look over the last year’s worth of receipts/bills and pick the most expensive you ever paid as your guide until an increase is announced. Here’s another tip: When allotting your funds, make sure you don’t use the exact figure. Instead, round off to the higher number, so that you won’t be short on funds.

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admin
Date:
July 1, 2012 um 7:13 am
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Budgeting
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