Budgeting is all about being proactive rather than reactive with your spending. This distinction makes all the difference. The concept of budgeting does make a lot of sense, but some people may have problems putting the theory into practice. Budgeting is a skill that anyone can learn, but it takes a little trial and error that some people find discouraging. For tackling this and other challenges, here are some tested and proven strategies on how to budget your money better.
Ways to Budget Your Money Properly
The first lesson on how to budget your money properly is to give a “job” to every cent in your available balance i.e. to designate a use for all your cents and dollars before you start spending. By doing this you can avoid making bad spending decisions that are purely based on your mood and available balance. Be as specific as possible in each category of expenses. If all your money is already assigned to a specific purpose, you will have a much better chance of avoiding impulsive purchases and other types of expenses.
Thus, it is important to have a budget that accounts for all the expense categories you have in your life on a regular basis. When it comes to budgets, it is not enough to just have a few expense categories like food, rent, health and entertainment – the more you break these down into subcategories, the more prepared you will be to manage any kind of foreseeable expense, including buying clothes, dining out, going to the movies etc. Just because you’re living on a budget doesn’t mean that you can’t do these things any more – rather, it means that you will do them within specific bounds that can be supported by your income without taking you away from your financial goals.
Here’s another tip on how to budget your money better – take care of big purchases/expenses on a monthly basis, rather than putting them in a yearly budget or some list you rarely care to revisit. The key to avoiding bills-induced stress is to include all your expenses in your monthly budget. This can be very tricky with big-ticket expenses like yearly insurance premiums, tax payments, vacations, high-ticket items etc. The best way to make sure you can meet
such obligations is to spread out the full amount over several months – your annual vacation over 12 months, semi-annual insurance installments over 6 months, and so on. Using this method, you are explicitly accounting for larger expenses in advance. Since you spread the amount over several months, you don’t have to worry about having enough money left over when the expense is actually paid.
Another strategy on how to budget your money better is to embrace adjustments and corrections. A lot of people give up on the practice of budgeting after a month or two because they feel like they can never anticipate all their expenses correctly. However, just because you have a budget doesn’t mean that you can or you have to predict all future expenses in order to be successful. Instead, when an unexpected expense arises, you should deal with it by reallocating funds from non-essential categories to cover the unexpected amount.
Basically, it all comes down to this. If you’re serious about taking control of your finances and learning how to budget your money better, the takeaway is this: budgeting on a regular basis isn’t hard but it does require time and commitment. With the free online budgeting tools available today, budgeting has never been easier. But that doesn’t mean that it will take the same amount of time as just doing a quick math of your expenses for the month and going with that. That’s kind of the whole point. Awareness and deliberate action are the two key factors that make budgeting such a powerful tool. The simple answer to the question of how to budget your money better is: don’t try to take any shortcuts and you will quickly start seeing noteworthy results! And don’t forget, budgeting will probably take up the most of your time during the first few months you are doing it. After a while, you should have a personalized budget template that doesn’t require a lot of changes over time.