A budget is a tool used to control your spending and manage your personal finances in a successful manner so that you do not overspend and can find ways to trim your spending to free more funds to repay your debts or save for an emergency.
A budget can help you picture your financial situation and work towards your financial and savings goals.
When you can see where your money is going then you might be able to cut your spending enough to get your debt under control and separate “wants” from “needs.”
What Does a Solid Budget Give Me?
When you prepare a budget that is manageable for you to follow you will:
• Be able to fully understand where your financial position stands;
• See how much money you need to cover your basic needs;
• Gain control of your spending if you make a manageable budget and stick to it;
• See whether your daily expenses are going towards “wants” or “needs”;
Preparing a budget involves listing your income and expenses for a period of time – usually 12 months. Generally you will take a tally of your monthly expenses over these 12 months and your income for the prior 12 months.
Preparing a budget will take time and you must be realistic in your planning. You should prepare the budget with your partner or spouse if you have one.
You must be disciplined and committed to make a successful budget and stick with it; you must record all expenses no matter how small or large and you must stick to the budget and not vary from it.
This will likely be challenging at first but you’ll see how easy it as once you get used to it!
Within your budget you should allow for small perks and rewards so you can stick to the budget successfully.
Sticking To Your Budget
Your budget can be written, a printed document, or an electronic file that you use to keep track of your income and expenses to control your spending.
As a money management tool it can be a great resource, for people who are:
• Tight on money;
• Are having trouble keeping track of your spending;
• You are struggling with debt and are finding it hard to pay off;
• You don’t have any savings;
• You’d like to see your financial picture so you can spend your money more efficiently.
A budget is the first step to learning how to live within your means. You can learn how to reduce your costs and save for what is necessary and important for you.
Tips on Making a Budget:
Set Realistic Goals: Take the time before you begin preparing your budget to set realistic financial goals. Are you trying to get out of debt? Are you trying to save more? Would you like to see where you are spending the most?
These questions will help you structure your budget and set realistic financial goals;
Keep Track of Expenses: Keep track of all of your expenses no matter how small every day for a month or so before you sit down to incorporate these expenses into your budget.
This will help you understand your spending habits so you can make a realistic budget.
Use a spending tracker app: This makes it relatively easy to keep track and measure your spending. Every time you buy something record it on your app.
The app will give you a summary of your spending by day, week and month.
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