A budget gives you a clear picture of where your money goes each month
EVERYONE Financial strategy is based on budgeting. You need to know where your money is going if you want to be in control of your finances, whether you’re living paycheck to paycheck or making six figures a year. Contrary to popular belief, budgeting isn’t just about limiting your spending and getting rid of all the joy in your life. It’s about knowing how much money you have and where it’s going, and then deciding how to spend that money effectively. When you think of budgeting as simply spending all your money consciously, you have more choices! Once you’ve budgeted for something, you can spend it without feeling bad. Many people claim to have found extra money by creating and sticking to a realistic budget. Here are the seven best budget ideas!
Practice budgeting to zero
Budgeting to zero means that you keep track of every ringgit you earn and budget it until you don’t have a single ringgit left. For example, suppose you earn RM2,500 every month. You must not have any money left over after planning your set costs, savings contributions, investments and other extras. Budgeting to zero can help you understand where your money is going and give meaning to every ringgit you make.
Create your budget before the month starts
Plan ahead to stay on top of your budget. Plan your next month’s activities and expenses a week before the start of the new month. You might have a road trip or a doctor’s appointment in one month, but not in the following ones. Set a reasonable budget after planning your month. Divide your money into necessary expenses, optional expenses and savings contributions.
Every month is different
Some months you need to plan for things like school supplies or basic car maintenance. In other months you save for travel, birthdays and holidays. Whatever the occasion, make sure you budget for such expenses. Stop those important events from sneaking in by opening your calendar while you’re creating your budget. Be sure to adjust your budget each month as circumstances change. Create a savings account that you can fund year-round. You will be stressed if you don’t have a plan. And that takes away any joy in giving and enjoying.
Track your expenses to create a solid budget
If you really want to start budgeting efficiently, you first need to understand how much money is going in and out of your account each month. The easiest way to do this is to write down all your income and expenses for 30 days. This means being aware of each transaction and recording them in a spreadsheet or using a budgeting application.
Set your financial priorities
After your expenses and income, your goals are likely to have the greatest impact on how you manage your savings. For example, if you know that you will need to replace your car in the near future, you can start saving now. But think about long-term goals—it’s critical that retirement planning doesn’t take second place to immediate needs. Learning how to prioritize your savings goals can help you decide how to allocate your funds.
Make saving automatic
Almost every bank lets you set up automatic transfers between your checking and savings accounts. You can choose when, how much and where to transfer your money, and you can even split your direct deposit so that a portion of each payment goes straight to your savings account. Set up automatic transfers to pay bills or save money without having to think about it, and use budget apps to keep track of your spending.
Saving money in a consumer-driven environment can be difficult. However, if you think carefully about how you plan to spend your money, you can avoid going crazy. Examine your existing expenses and ask yourself what your priorities are.
While it feels good to avoid checking your balance, understanding where your money is going is crucial. Set up a sinking fund for certain purchases if you know you’re happy to spend more money on certain things. For example, if you know you love to travel, open a savings account and put money into it.
While these few suggestions don’t cover the entire personal finance course, they are a fantastic place to start. The key message is to be aware of your spending and financial goals. As long as you do this, the rest will fall into place. Saving and budgeting may seem impossible, but they don’t have to be.