New days are all alike; each one offers the chance for a new beginning. But there is no new day quite like the start of a new year. When one rolls around this notion gains the power of the crowd, an ideological stampede that pushes each and everyone to adopting simple steps that could lead to a better life.
For many, the secret to financial health lies in one all encompassing godly document — the budget. There’s a reason why every financial book, blog and commentator says the budget lies at the start of the journey to financial security and that’s because they’re right. Now isn’t the time to judge yourself about past mistakes that contributed to the failure of your last budget. It’s the time to look at the reasons behind the the failure of your last budget, and come up with a plan that works for you.
There are two main reasons why budgets fail. The first is that they don’t have accurate records of past spending, and the second is that they lack well-defined attainable goals. If you’d like a detailed guide that’ll help you make a budget and stick to it, then you should probably keep reading.
- DOES YOUR BUDGET SUIT YOU?
From spreadsheets to apps there are thousands of tools that could help you build a realistic budget. And you could follow the basic 50–30–20. That’s 50 per cent on living expenses like rent, transportation and bills, 30 percent on lifestyle choices that aren’t particularly necessary, like brunch once a week or nights out with the friends, and 20 per cent on saving and debt repayments. However because some of us live in cities so expensive that 50 percent on living expenses makes no actual sense, this formula may not work, you’ll have to tailor it to a ratio you can live with. To do this take a look at step 2.
2. TRACK YOUR SPENDING
It’s impossible to budget if you don’t know how you spend your money. Of course, it’s easy to say how much you spend on rent and internet expenses because those things are fixed and set in stone. However, when it comes to the random things that are a little bit more unexpected and seemingly off the cuff, you’ll have to get a little more creative. If you can track what you spend then you’re half way to coming up with a conservative plan that’s less painful than poison. So take a month to live your life unbudgeted, but this time, take note of where your money’s going. It’s your month of grace so live it to the fullest. But of course, don’t wreck yourself by doing things you truly can’t afford like buying a yacht or something like that.
3. WRITE YOUR BUDGET OUT
This sounds easier than it actually is, but in all honesty its the most important step. The same way plans don’t exist until there’s a hard copy is the same way you don’t have a budget until you’ve written it down somewhere.
4. STICK TO IT LIKE WHITE ON RICE
Think of all the hours you’ve spent following steps one to four. All of that time will mean nothing if you don’t actually stick to your budget. The best encouragement to stick to a budget is a tangible goal, like saving up for a car, or a life changing holiday. Just imagine how good it’ll feel when at the end of it all you’re able to make a down payment on the house you’ve always wanted. Let that be your incentive.
5. ADJUST FOR REAL LIFE
As they say life is what happens when you’re busy making other plans. After you’ve made your budget, life will happen to you and when it does it could screw both you and your budget. Unexpected but incredibly necessary expenses are the antagonists of every financial planner. But that’s why it’s important to budget them in. The same way women make a point of carrying vex money to account for all undesirable situations that could occur on a bad date is the same way you should make an emergency fund.
Budgeting may be one of the hardest things you’ll ever do, but the difficulty is definitely worth the reward.