10 tips to help you stay on budget
Here are 10 handy tips to help you avoid overspending.
Creating a budget is actually easier than sticking to one. Working on numbers and limits on paper is easy, but resisting the urge to eat out just once more is the difficult part. How exactly can you avoid overspending? Here's a round-up of our 10 favourite tips to help you stay on budget.
#1 Automate your savings
The essence of budgeting is to ensure that you save enough each month to bring you closer to your financial goals. That's where automated savings come in handy. By automating your savings through your bank account, you can ensure that you meet your monthly savings target each time. The best way to automate your savings is to open a separate bank account, or sub-savings account, and use that account purely for storing savings. Schedule transfers of a set portion of your income to this account each month, preferably right after your payday. Automating your savings not only helps you stay on budget, it also helps you save more.
#2 Create an emergency fund
Going over your budget typically occurs due to poor spending habits, but occasionally it could happen due to unforeseen financial emergencies. The repair costs following a car accident, sudden medical emergency expenses or the cost of fixing a broken roof could eat out of your monthly budget. Since you can't possibly plan for such scenarios, create an emergency fund similar to the savings account mentioned above. Transfer a set portion of your income each month to this emergency fund, which should not be touched unless an emergency occurs. This way, you can stay on budget even during unforeseen circumstances.
#3 Calculate your budget after taxes
The best way to stay on your budget is to have an accurate understanding of your finances. This means creating a budget based on your after-tax income. Doing so will not only prevent overspending, but could also prevent under-allocating money to essential expenses.
#4 Spend on essentials first
Upon receiving your monthly salary, set aside the necessary amount for paying off essentials. This includes monthly mortgage payments, rent, student debt, car loans and utility bills. These are essential expenses that you must pay off with your budget in order to have a basic standard of living. Such costs should always be your priority when working with a budget.
#5 Review your spending habits frequently
It's natural to go over your budget when you first create one. This often means that you don't have a solid understanding of your spending habits yet. Once you understand your financial habits, you'll be able to tweak your spending and stay on budget. Try reviewing your monthly expenses each month and understand your cash inflow and outflow. Do you overspend on a particular activity? Are you particularly impulsive when it comes to a certain category of spending? Once you analyse your spending habits, you'll be able to watch out for categories you tend to overspend on and thus, stay on budget easily.
#6 Cut down unnecessary spending
Using the insights from tip 5, you could easily cut down on unnecessary spending. The best way to do this is to categorise your cash outflow into "essential" and "non-essential" costs. From there, you can explore the various sub-categories of "non-essential" spending, including eating out, buying branded goods or splurging on leisure activities. Remember, awareness is the first step to taking action. Once you realise that you're overspending on non-essentials, take small steps to reduce these expenses and stay on budget.
#7 Plan expenditures in advance
The most common reason why people splurge is because they don't plan their spending in advance. Let's take a common example: not writing a grocery list. Once you visit the store, you're more likely to buy groceries that you don't really need and impulse-buy items that seem necessary but actually aren't. Planning your meals or online shopping could go a long way in helping you stick to essentials and stay on budget.
#8 Know when to overspend and underspend
What about a little self-care? Staying on budget shouldn't be a miserable and restrictive process. In fact, the stricter your budget, the more likely it is that you won't stick to it. Create a budget that helps you balance your needs and wants, while bringing you closer to your financial goals. This can be done by tweaking the amount of spending you allow within each expense sub-category. For example, a shopaholic may want to allocate a larger portion of his/her income to shopping, over leisure activities like travelling. In contrast to this, a food-lover may choose to spend more on dining out and less on clothes shopping. You can, therefore, compensate for overspending on something you love with underspending on other categories.
#9 Review your goals
Staying on budget is all about being feasible and realistic. This involves frequently reviewing your financial goals and deciding if they're still appropriate. For example, a person who's just been laid off might want to rethink his/her goal of saving up for a new sportscar. Alternatively, goals like saving up for retirement can always be maintained. What needs to be tweaked, however, is your monthly contribution to your goal and whether you can manage it. Creating realistic goals and adapting them is key to staying on budget.
#10 Use a smart budgeting tool
One of the biggest reasons why people struggle to stay on budget is simply because they aren't aware when they're overspending. A popular way to resolve this is by using smart money management tools, such as the Finder app. The Finder app is a budgeting tool that helps you manage your money and stay on budget easily. It allows you to connect your bank accounts, credit cards, loans and investments to a single dashboard. You can, therefore, get a full overview of your finances any time you want. You can also track your expenses, monitor your credit score, and shop around for the best savings deals — all for free. Staying on budget has never been easier with smart budgeting tools.
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