Budgeting is vital to keep a tight rein on your money. Many people think that they do not need to budget if they have money coming from their ears because it only helps those living paycheque to paycheque.
Budgeting is the first step of financial planning. Perhaps you may not need to keep tabs on your monthly outgoings, but you will need to plan around your investments and retirement funds to build your wealth.
Budgeting requires little patience and consistency. Many of you find it unpleasant to track down your expenses constantly, but that is the only way to live a healthy financial life. First off, you should bear in mind that your budget should not be forceful. It should shape your spending behaviour rather than control your financial life. Your budget should align with the changes in your financial condition.
Here are the effective ways to make a stress-free budget:
Start your budget with clear goals
Your budget will not benefit you at all if you do not set clear goals. Start with setting smaller goals, such as setting aside £100 every month for a rainy day. If you are new to budgeting, target one goal at a time. It will help you stay motivated. After achieving your goal, you should set another goal and make a plan to achieve that. Your budget will vary by the goal you set. After taking budgeting in your stride, you should also start setting long-term goals.
Use the right tool
A manual spreadsheet can help you track your expenses, but the problem with it is that you will have to keep noting down all transactions. You may miss some transactions, which will give you a false picture of your financial condition. You should rather use a budgeting app. Make sure you use the right app.
Some apps allow you to invest your spare money while others only help you with saving money. Choose an app based on your goals. Focus on the following factors while choosing a budgeting app for you:
- Your budgeting app should be able to fetch all transactions you make. An automatically record of transactions in one place will save your time and energy. However, you will have to note down cash transactions on your own.
- Check if your app provides customised features. For instance, freelances would prefer an app that adapts to their fluctuating monthly incomes.
- Some apps allow you to track real-time spending. You can set spending alerts, to prevent yourself from overspending.
- Your app should be able to demonstrate your spending based on categories. Categorical expenditures will let you know which area consumes the largest proportion of your income and where you need to cut back on your spending.
Do proper research to understand the features of each budgeting app. Choose the one that suits your goals.
Take advantage of automation
Automation keeps you away from the hassle of transferring payments. It can be hard to remember the different due dates of your credit card bills and other loans. Missed payments can attract interest penalties and late payment fees. You can avoid the struggle of remembering different due dates by using automation. The direct debit allows your bank or lender to withdraw a particular sum.
You should use the automation feature to save money as well. Open a savings account and link it to your pay account. Set a particular limit that you want to save so every month that amount is pulled from your pay account and transferred to your savings account. An automatic transfer will help you grow your savings quickly.
Having an emergency cushion also helps tide you over when financial emergencies catch you. You can avoid relying on loans. However, if you still need some money due to short savings, you can get online no guarantor loan from a direct lender.
Automation ensures optimal cash flow. You will be able to cover all of your expenses with the rest of the money. By paying yourself first and setting aside money for all bill payments, you will have a clear picture of how much you have to spend. It will prevent you from overspending.
Keep your budget simple
Complicated budgets are the reason why people give up in the middle. Your budget should be simple to follow. Make sure you divide all your expenses into different categories. It will help you understand which category is eating up the most of your money. You will have a clear picture of your finances that enables you to cut back on your expenses. A simplified budget makes it easy to see where your money is going.
There are various budgeting methods. You should use all of them to see which one works best for you. It is possible that you need to switch between them as your financial condition changes. For instance, you will find envelope budgeting worthwhile when you have lost your job.
Your budget is a tool to help improve your financial situation. Therefore, it should be flexible. At times, you may have to spend more money than you have planned, so your budget should have scope for adjusting your expenses.
Review and adjust your budget regularly
You should review your budget regularly. Adapt your budget to your changing financial circumstances. Make sure that you are able to save money for your children’s education, emergencies and retirement. Your budget seems to work fine when you are able to achieve your financial goals. You will be aware of your financial situation. It will help you optimise your spending.
The final word
Many people find budgeting stressful, but it does not have to be if you follow the right way. You should choose a budgeting method that works for you. Keep it flexible so you can adjust it according to your financial condition.
Instead of a manual spreadsheet, you should choose a budgeting app. It will keep you free from recording all transactions and give you full clarity of your financial condition.
