All the best!
“I have a budget, I just go over it every month.”
Sounds familiar? Many people have an amazing talent for setting a budget, but only a handful of people are just as good at keeping to it. Budgeting is more than just making sure your head is above the water and that the dreaded negative sign doesn’t appear too often. At its best, budgeting can really help you to not only keep track of but also meet your financial goals in life.
It doesn’t really matter what your income is at the moment. These five budgeting habits will keep you right on track.
1. Expense Tracking Is Your Regular Reality Check
Tracking your expenses can feel like the ultimate mood-killer, but that’s why it’s important. Numbers don’t sugarcoat themselves to make you feel better about your spending mishaps.
The crucial thing to expense-tracking is not to be so put-off by what you see that you abandon it altogether because the truth hurts but to mentally prepare yourself, especially if you’ve never done it before, to find out how some habits are costing you more than you think. Uber-ing too much? Too many cups of gourmet coffee? That’s alright, because you now know what you can fix.
Download an expense-tracking app that also has a function where you can compare your current expenditure to your planned budget for that specific category. For example, if you have set aside S$50 for coffee, make sure you pace out your caffeine shots, or impose a self-ban on having a cup of coffee altogether once you have exhausted that budget.
Also, prioritise to sort out the major expenses and ensure that the money for spending is used only after all debts are settled and savings set aside.
2. Forecast Mid To Long-Term Spending Needs
Anticipating what we might need calls for some consideration of the future and allows us to plan for it. Making plans for a wedding? A potential housing down-payment, or perhaps eyeing that fancy coffee machine? Think of a one to five year timeline and list down the most likely things you would probably have to spend on. Obviously, nobody can predict the future, but having savings set aside for special projects can never hurt. It’s much easier to think of what you can do with excess funds if plans fall through, than to scramble for money when you urgently need some.
This mid to long-term savings is different from your retirement fund, and should also be kept separate from your rainy-day fund.
3. Keep Your Goals Real
Keep your dreams wild, keep your goals real. Well, at least when it comes to budgeting. The most hardcore and disciplined budgeteer will succumb to budgeting burn-out with unrealistic goals.
Base your budget on what you actually earn, in this case, real money, instead of your fantasy amount of what you think you can save or what you’d love to spend on shopping per month.
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Also, don’t get swayed by what your peers are doing with their money. It’s tempting to be slack with your budget when your friends don’t seem too concerned with swiping the credit card. It’s also easy to fall prey to budget-envy when you see how some friends just seem to be able to save a lot more than you. It’s not a competition; it’s really about your money and where you are in life at the moment.
4. Progress Checks Are A Must
Budgets aren’t dead numbers. They are a real-life reflection of your current and future financial status.
Review your progress every six-months to a year. How difficult or easy has it been to keep your budget? If you’ve been consistently going over almost every month, consider the possibility that you’ve set an overly ambitious goal, or that you simply need work on delaying gratification.
On the other hand, if you seem to find it really easy to keep your spending on the limit, then you may want to allocate even more funds for paying off debts or investment and savings.
5. Reward Yourself, Sensibly
Guess what? Keeping to a budget isn’t easy for most people, and rewarding yourself is a great way to keep the motivation up and, ironically, remind yourself that money doesn’t rule over your life.
Treat yourself to a nice meal, a spa treatment, or anything that feels good as long as it isn’t completely purpose-defeating, like a luxury car. Keeping your little luxuries as some kind of reward every half a year or so is a good way to cultivate some level of control over your spending urges.
Budgeting isn’t necessarily the most enjoyable thing to do, but developing healthy habits will help ensure that in the long run, you have the resources to do what you really enjoy.
All the best!
