- A realistic budget can be a good long-term financial solution
- They are a good way to take control of your own finances
- By taking stock of what you spend, it can help you save in the long run
Regardless of your financial situation, a clear budget can be a fantastic financial tool. With a good budget you’ll be able to save more, pay off debts and feel in control of your finances. For anyone currently in debt or with a payday loan to pay off, a clear budget is one of the best ways to make sure you’ll be able to pay off your loans. In this article we’ve covered everything you need to know to budget effectively.
Why Do I Need to Budget?
If you have a current payday loan or debts that need paying off, an effective budget can be a fantastic financial tool to help you save money and pay off debts. However, the reality is anybody, no matter their financial situation, can benefit from budgeting effectively. Many people feel overwhelmed by their finances and will turn a blind eye to their financial situation because it seems stressful and sometimes scary. Remember, your finances might be scary but that’s all the more reason to budget. Once you’ve got an effective budget you’ll feel in control of what you’re spending, what you’re saving and what you’re making. Getting a clear picture of your finances puts you in the driver’s seat and allows you to plan for the future and make the most of your money.
There are many tools available to help you set a realistic budget
The benefits to budgeting effectively are endless. Whether you’re looking to find a little bit of extra money for an upcoming holiday or wanting to pay off your debts as quickly as possible, a good budget can help you reach your financial goals. Chances are you’re spending money in areas you don’t need, or want, to. When you have a clear budget and you’ve decided what’s important to you financially, meeting your financial goals is far more attainable.
How Do I Create a Budget?
The first thing to do when you’re looking to create a budget is identify your income. The modern American might have more than one stream of income. Your income could be anything from benefit payments, to wages, to pension payments. Whatever you have coming in it’s important that you know how much you’re receiving monthly.
Budgeting effectively can help long-term financial problems
Once you know how much you receive every month you should look at what you currently spend in various areas of your life. This will be made a lot easier if you use a banking service like Monzo, which allows you to categorise your payments. If you don’t use the service like this, you can just look through your bank statement from the last month and see what you spent in basic categories. Some examples of categories would be; Housing, bills, monthly subscriptions, grocery shopping, eating out, clothes shopping, mortgage payments, travel, medical. The important thing is that you have a system that works for you. Anything that you think you need to spend on a monthly basis should have a category.
Like in this example, when you’re looking to set up a budget you should first identify what you’re currently spending in each of your categories. Then look to see where you think you can save money. For example, it might be that you’re eating out a lot more than you need to be, so by spending more money on groceries you will save money overall all by eating less expensive meals. You might be paying for subscriptions you don’t use or spending far more on new clothes than you realised. Some things in your budget will be non-negotiable like housing costs, but you can always look into things like your bills to see if you could be getting a better rate with another company.
It’s worth taking time to consider where you might be able to save money as frivolous and unnecessary purchases will often add up quickly. By setting a clear budget you’ll be clear on what you need to spend and where you need to spend it.
How Do I Know How Much My Budget Should Be?
How much your budget overall will depend on what your financial goals are. If you’re looking to save an extra $100 a month, you’ll need to take that out from somewhere you’re already spending. If your goal is just to start breaking even every month, you need to make your budget equivalent to the amount you bring in every month. When you’re making your budget it’s important that you look at what you currently spend, there’s no point setting an unrealistically low budget because you won’t be able to stick to it. Set reasonable, attainable goals to help you reach your financial targets.
Automatically Saving with a Budget
One of the most reliable ways to save money is to set up a standing order from one bank account to another. By predetermining how much you plan to save each month, you remove the monthly decision and make saving easier. If the money is automatically leaving your account the moment it arrives it will be a lot easier for you to save. Like in our example if you’re hoping to save $425 a month set up the standing order of $425 into a savings account the day of your payday. This way you’re saving without even thinking about it.
How Can I Stick to my Budget?
Setting up an automatic payment to your savings account will make it easier for you just stick to your budget. Physically writing out your budget will also make you more likely to stick to it. One of the easiest ways to keep track of what you’re spending and keep in line with your budget is to use an app like Monzo. With a card linked to an app like Monzo you will be notified every time you spend money, and apps like Monzo can even categorise the payments you make. That means when you spend $100 in the supermarket, Monzo will send you a notification letting you know that you’ve spent $100 of your designated groceries budget. An app like Mint will do the same thing and can be linked to almost any card or account. You can set and edit these budgets on the app so it’s easy to keep track of what you’re spending and where you’re spending it. Today there are many banks offering accounts that come linked to a mobile app so do some research and find out which one will be best for your unique needs.
What Tools are Available to Help me Budget?
- Mint – free budget tracker and planning app
- Money Advice Service budget planning tool
- Savvy Money – Support with accelerated debt repayment