Today on Let's Get Working we are watching Part 2 of the interview with Chartered accountant George on budgeting. The purpose of budgeting is so you can save money over time. Read George's tips below to learn how you can accomplish your goal without causing financial distress.
Set a realistic budget. You can save a lot of money when you giving up things, but giving up some things such as food isn't always realistic.
Don't go overboard when you cutting down on your spending. Reducing your budget in small increments will make it easier for you to adjust, and won't negatively affect your attitude because you're not suddenly cutting a lot of luxuries.
Track your spending against your budget. People have trouble with their budgets because they forget to continually track their spending. They see all this money start to build up and think they're doing, so they overspend the reserve they've built up and blow out their budget for the month.
Plan for unexpected things to happen. This could be unforeseen bills, replacing broken items, or paying hospital bills.
Set aside a little extra each month as a contingency. The amount depends on if you have a family and how much you earn. But around 5 - 10% of your total expenditure for the month should be set aside for unexpected bills. This will give you a buffer that allows you to get money fast when you need it.
Be careful of bad spending habits. Frequent small purchases don't seem like much but they can add up quickly. Just by buying a cup of coffee and lunch every day, this small amount of money can easily add up to $3000 by the end of the year.
Don't fret if you go over your budget. It should be only used as a guide, not a hard and fast rule. There will be times when you have to spend more than you accounted for. This happens to everyone so by recognising this fact, it'll stop you from feeling bad when it does happen because. Keep in mind if this happens to often it can be a warning sign that you need to re-examine your budget.
Review your budget at least once a month. Look for any areas where you can comfortable make more savings and any areas where you need to allow more money to be spent.
Plan for long term goals. It's not realistic to expect massive savings straight away, and if you do you're just setting yourself up for failure. Make a long term budget that way you won't be disappointed. After 5 years you may be able to afford that new car you want or take that holiday you've been dreaming of.
Reward yourself when you hit a budget milestone. It doesn't have to be big or expensive. Just something that gets you out of the norm and motivates you to continue your good saving habits.
Avoid becoming materialistic. Don't buy things for the wrong reasons. Buying things just to impress others or fit in will cause financial grief. There are always things you'll want to buy but you have to control yourself and don't spend more than you can afford.