One of the most common mistakes we can make with our money is failing to create a budget that fully accounts for all of our expenses.
Budgets are a really handy way of allowing us to track spending and give an informative calculation of our finances over whatever period of time the budget is created for.
Essentially, a budget will let you know what you can and can’t afford and ensure that you’re aware of what’s coming in and going out. For a budget to really be effective, here are a few things you can do every day to keep your finances on track.
1. Save for an emergency
Try making room for an emergency fund which will allow you to pay for things that come up unexpectedly like car repairs or medical expenses. Your emergency fund can save you from the need to use your credit card in situations that catch you by surprise and save you from playing financial catch-up to get back on your feet. Start small, by adding what you can afford each pay and once you’re comfortable, try working on a larger savings goal (like putting away 3 to 6 months worth of income), which you can use if you suffer from larger emergencies like a job loss in the future.
2. Budget for unexpected costs
The unexpected happens, but don’t let it take you by surprise. Instead, set aside an amount of money for each budget period that is available for any kind of unexpected costs, like attending an evet, purchasing tickets or gifts. Preparing for the unexpected will mean that you can do the extra things that would otherwise not be catered for in the budget. So when these costs take you by surprise, you’re more than ready for them.
3. Use budgeting services
You can make budgeting easier and create some accountability for yourself by downloading apps to your phone or device which help track your spending or account balance. This is an easy way of monitoring your finances and literally puts the responsibility in your hands. Some of them even send you reminders on when certain bills are due or if you’ve spent too much money in a particular area of your budget.
4. Pay off your debts
This one should go without saying, but make it a point to include paying off debt to ensure that you’re making progress on outstanding balances. Determining what you can afford to pay should be easy enough if you’ve been keeping a neat budget for all of your other expenses. Another handy tip, if it’s possible, is to pay off more than what’s required each period to ensure that you pay less in interest fees.
5. Have a plan for left-over money
If your budget is working well, or going better than expected – great news for you! Having a surplus after you've paid all of your bills can make it easy to spend on unnecessary things. Instead of doing that, have a plan for your left-over money. Consider investing in stocks or depositing it into a high-interest savings account – you’ll thank yourself for it later.
6. Update your budget regularly
Due to lifestyle changes and fluctuations with your bills, it's a good idea to update your budget every three to six months to ensure you avoid mistakes and keep your finances in check. This will also mean you can update things like utility costs and new expenses, which are often dependent on the time of year or season. If you’re lucky enough to have increased your earnings through a change of jobs or a pay rise, be sure to add that to your budget so that it remains accurate.