Have you been finding it hard to stick to your budget, or to live within your means? It might be time for you to revisit budgeting, but with a few particular factors in mind. A budget is supposed to help you save money, and keep track of where your expenditure is. That way, if there's an area that's too high, you can cut it down.
A good budget will take into account every single little expense per month, fortnight or week - however you set it up. It'll have room for mobile phone credit top-ups and snack foods and partying on the weekends, all while allowing you to save money, or to repair a broken credit file by paying off a debt or loan.
So, a budget sounds like a great option, but how do you make one that's perfect for your needs?
1) Consider your whole income
The first part of your budget is writing down your income. This must be after tax, otherwise you'll be setting yourself up to spend (or save) more money than you have access to1. It might pay to look at your expenses from the last year2 so you can get an idea about what categories to include in your budget.
These categories are helpful when you want to cut down your spending. If your entertainment budget is too high, go to the movies a little less, or eat dinner at home before you go into town for drinks.
2) Highlight your priority areas
Once you have a firm picture of where your money is going, you'll notice some areas of spending that you need more than others - these are priority categories3. These include things like rent or mortgage repayments and grocery shopping, power, water and electricity bills and even school fees or mechanical servicing for your car. You can't often save a huge amount of money in these areas (unless you decide to leave the expensive brands alone at the supermarket), so they're basically fixed costs.
Don't worry if your non-necessary expenses are high, but make sure you work on cutting them down over time.
In all other categories, however, you'll notice that the costs are always different month to month. That's because your wants change over time, you have different events on, or you're away on holiday. In the middle of summer, for example, you'll be at the beach and enjoying the outdoors and might be away on holiday so your non-necessary costs will be higher. In winter, you might go skiing, which is always an expensive activity. You could have a whole string of weddings to attend, and need to buy gifts and clothes and get transport organised. Christmas is also a time when spending on food and presents will increase.
Don't worry if your non-necessary expenses are high, but make sure you work on cutting them down over time so that you can save more, or pay off your debts more effectively.
3) Automate all of your savings
With your income and expenses written down, you'll be able to see how much you have leftover. If it's nothing, you won't be able to save anything or pay off your debts, so you need to find a way to cut down your expenses. If there is something left, you should put it straight into a savings account and let it accrue interest3.
Set the scheduled deposit into your savings account for the day you get paid. This means the money is untouchable (to an extent) and you'll be less tempted to spend it.
No matter why you need a budget, finding money for savings or paying off your debts is important. Sit down for a weekend and sort out a watertight budget that you can stick to, including automating your savings. Your credit report will likely benefit. Ensure you get a copy of your Equifax credit report today.
1Time Money, How do I set a budget I can stick to? Accessed December 2016.
2Australian Securities and Investments Commission. How to do a budget. Accessed December 2016.
3Bankrate, Secrets to creating a budget. Accessed December 2016.