Budgeting is an important component of financial success. It is not difficult to implement, and it is not just for people with limited funds. Budgeting makes it easier for people with income and expenses of all sizes to make conscious decisions about how they would prefer to allocate their money. For many people, having a solid budget in place, knowing how much money they have, and knowing exactly where that money is going make it easier for them to sleep at night. Here are some steps you can follow to make budgeting better.
- Pay yourself first.
Set aside 20% of your income and put it on your savings account or emergency fund (I recommend a passbook account). Pay your insurance, and buy additional shares in your investment.
Trick: In a word, “early,” if you have not started early on, then start today! Financially successful people let their money work for them through the power of compound interest and time. You can start small. Save a portion of your income regularly and consistently.
- Needs VS Wants
Have a plan to prioritize your expenses: NEEDS first, WANTS second. To create a more realistic plan, track your expenses for six months to a year to help you see what you are actually spending. When you spend less than what you earn, debt is avoided and savings occur. Financially successful people earn interest; they don’t pay for it.
Tips: Bills should be paid automatically or when you receive them, not when they are due. Do not wait the full 30 days to pay credit card bills. This provides the illusion of having more money than you really do. Pay utilities when you receive the bills. Leverage automated payment options if the bill is the same reoccurring amount from month to month.
- Avoid Debt
If you are having worries or stressed about how you handle money, the problem could be the following:
– You are not able to control impulse spending,
– You do not appreciate the value of money, or
– You are living above your means
If none of the above, the problem is probably you. (Sorry!)
Tips and tricks: Leave your credit card at home. In that way, you avoid swiping your credit card whenever you are tempted to splurge. If you have debts, pay in full to avoid penalties. Better yet, for your groceries and basic purchases, pay in cash. Also, make sure you have already prepared at home a list of items to buy.
“Creating a budget is the easy part, sticking to the budget is the challenge.”
Kimberly Tan Castaneda, also known to her friends and family as “Kim,” is a financial literacy advocate, an entrepreneur, and above all, a full-time mom. During her spare time, Kim conducts financial literacy talks. This beautiful lady is not only good in managing her home but their family’s finances as well, and this is the reason why friends often ask her advises on money matters. Beyond her advocacy and small business at home is her priority – her family. She is, first and foremost, a loving wife and a doting mom to her adorable twins, Xyreb and Zander.