Planning your money requires you to put in place good budgeting techniques that will help you direct your income properly.
This is particularly important if you live in America, the UK, Canada, UAE, Australia, and other countries where everything is so fast that budgeting and planning the direction that your money should go could most likely become the least important thing on your already stretched To-do List.
This is why in this article; I will be sharing with you some great budgeting techniques that you can start using immediately to plan and direct your money appropriately.
Why are budgeting techniques important?
- They help you stay in charge and prepared. This puts control in your own hands and gives you the opportunity to quickly determine how things should go.
- These techniques help you to look through your spending and easily prioritize things based on their scale of importance.
- They help you stay focused on your financial goals and priorities. This is particularly important in fast paced environment as it is easy to lose track of goals with the many distractions making rounds.
- Using some of these techniques will help you to track and measure things so that you can compare numbers and results over time to know what is working and what is failing.
- Budgeting techniques can help you plan your debt repayments in such a way that you can become debt free faster than you imagined possible.
Why many people struggle with their budget.
- Higher expenses can prevent your budget from working. And this could be because of shortage of expected income or any other form of uncertainty that suddenly stretches the budget out of place.
- Unplanned emergency is also a case. When you don’t have between 3 to 24 months savings, it will become difficult for your budget to withstand unexpected financial pressure.
- When you have defective money Character, you are most likely to cheat on your budget, not take it seriously or be careless with the whole process and in that case, it won’t produce the desired result for you.
- A Budget is Too tight when it is not flexible enough to withstand shocks and shortages that might occur along the way.
A budget that will work is supposed to be flexible enough to easily adjust to life’s uncertain realities.
- When you are Complaisant and not paying attention, you won’t know when you budget needs adjustment. Also, being careless with the whole process also makes a budget not to work efficiently enough to produce the desired result.
Effective Budgeting Techniques Anyone Can Use
- Pay yourself first
This is the number one budgeting technique. Paying yourself first is how you build the necessary discipline and cash flow that will help you make your budget work.
If you decide to pay everyone else first before paying yourself, what naturally happens is that you will have nothing left behind.
And this would mean that you can’t clearly say if you actually spent your money on the things that truly matter to you.
2. Track inflow and outflow
When looking to plan your budget, the first thing you’re going to need to look at is how much money you have coming in and what the money will be spent on.
Being able to track your inflow will help you know how long it will be able to carry you in the month.
Also, by looking at your outflows, you will clearly see if the money wont be enough and the things that you can easily remove or add as the case my be to help balance the budget for the month.
You can do this weekly revenue and expenditure mapping with handy apps on your smartphone or keep it traditional with a book and pen. This is an easy system for keeping track of your bills so you’re never late again.
I would also highly recommend using your bank statements and receipts as references when comparing your income and expenses.
This ensures that the information you’re working with is as accurate as possible.
3. Outline Your spending
Once you have successfully identified your income and expenses for a pre-determined period, you can move on to writing out your budget outline.
When doing this, you can split the costs into multiple categories, such as fixed expenses (mortgage or rent), essential groceries, entertainment, leisure, and utilities.
In doing this, the 50/20/30 budgeting structure can be an absolute lifesaver.
Thee 50/20/30 rule stipulates that you should be spending 50 percent of your incomings on necessities, 20 percent of your incomings should be saved and 30 percent should be spent on your lifestyle choices.
Outlining things like this each month will help you to understand your spending for a particular time-frame.
Some people shy away from the idea of thoroughly budgeting their income and expenses.
And this usually stems from the perceived complexity that’s associated with the process.
For others, the idea of planning out a budget with long columns for different categories is just far too complicated to maintain.
But working with an outline helps take the stress and confusion away from the process.
4. Fund the budget categories
When the different categories have been identified, the important thing to do is to make sure that you set aside adequate amount to help take care of each categorybased on the amount of money you have available for that time frame.
You must also make allowance for unexpected expenses and even income so as to ensure that you are not always thrown out on your budget each month.
5. Continually Review and Update Your Projections
Don’t let your budget go out of date.
Make sure that each month, you set aside time to look through your budgeting activities and update things regularly.
This helps you to stay on top of your game and also see weak links on time and correct them.
With this, you will also be able to see when your expenses go up and strategize on how to accommodate it.
Even if your budget doesn’t need a major overhaul, checking it over will help you see where you’re spending habits are changing and if anything needs to be done due to that.
6. Use the Right Tools to help Yourself
To make the process of budgeting a lot easier to handle, you might need to use some tools that will help automate certain things for you.
This doesn’t even have to be anything fancy.
A simple excel sheet could help you get started. And there are also tons of apps out there that will help make the process a whole lot easier and faster but to start and keep track of things.
7 Be willing to try again with each mess up.
Many times, you will fall off your budget horse.
You have to make a conscious decision to get up and try again.
People who don’t prepare their minds on what they will do when things don’t go as planned end up giving up on the whole process when things don’t go according to plan.
But this shouldn’t be.
When you mess up your budget, don’t beat yourself up, just try to see when things went wrong and make amends.
When you make “not giving up” a serious part of your budgeting technique, in the long run, you will find out that you are able to plan and execute your budget better with time.
8. Build accountability into the process.
Having an accountability system helps you to stay on track with your budget.
When you know that someone is watching you or will check up you, it becomes a lot easier to stay consistent as you will not like to disappoint them.
9. seek help
The final part would be to always remember to seek help when you need it.
You might need to take a course on budgeting or general financial discipline.
It might also be a matter of getting a coach who will point you in the right direction when it truly matters the most.
Seeking and getting help in the process of trying to fix your finances is a necessity you can never pay too much for.
Final Thoughts
Making a budget and sticking to it is one of those disciplines that you must build if you desire long term financial progress in your life.
But just like any great thing in life, doing it isn’t always easy.
However, the benefits are worthwhile.
And if you take these budgeting techniques we have shared with you seriously, it will become a whole lot easier to manage the process and stay faithful to it despite the challenges that might come up along the way.
