Strategize your budget: Essential tips
The most important thing about money is that every single bit of it counts. This means that utmost importance needs to be given to strategize your budget. By doing this you will ensure that your precious and hard-earned wealth is put to its best use with maximum investment opportunities and minimal misuse.
Today, the methods to strategize a budget have become much easier as you have various online tools and applications at your disposal. However, there are some basics of planning your budget that will be crucial to put your money to its best use.
Here is how you can best strategize and plan your personal budget. With this you can take the first steps towards making healthy habits of spending, saving, and investing.
Tracking your money
- Before you start making a budget, you must know where your money comes from and where it goes. So you must track your spending and earnings for at least a week to understand your spending habits and put your outgoings in different categories like utilities, rent, entertainment, and emergencies. The best way to go about it is to use a budget planner or use any free mobile application. You can also go back to basics and use a simple paper pen or a spreadsheet. Whatever suits you best.
Create an outline for your budget
- The tracking that you did in the above step will help you lay a basic outline of your budget. You will realize that there are categories from where spending can be reduced and put to use somewhere else. The best way to strategize a good budget is to track your spending for a week and then make a plan for the next week and analyze how you can make it better.
Savings are important
- A common mistake made by many is to exclude savings while making a budget. It is important to understand that a budget is incomplete without special provisions for savings. You must commit to saving at least 10 to 30% of your income. Of course, you can save more too. I suggest that you put a motivation for these savings by deciding on a goal like travel, wedding, higher education, or a new car.
Be realistic with your budget allocation
- Novice budget makers often set unrealistic standards for spending and savings, especially after the first tracking exercise. Such unrealistic budgeting will lead to a failure of your plan and make the whole budget worthless. So don’t cut your expenses on the essentials or leisure because both need to be a part of your life.
Keep up your motivation
- As you follow these steps, you will realize that it is easy to strategize your budget but sticking to it is where many people fail. Keep reminding yourself why you started this healthy financial habit in the first place. Treat yourself a little when you stick to your planned expenses and save more each month.
Leave room for adjustments
- It is important to not make a watertight budget because it becomes difficult to stick to. You should strategize your budget in a way that there is room for unexpected expenses or sudden emergencies. This will allow you to stick to your budget even in the face of anything unexpected.
Keep reviewing your budget
- Now that you have a budget plan ready, you can follow this and keep living a healthy financial life! No! This is not how a budget works. Since your income and expenses are subject to variation, your budget will need to be reviewed time and again and be updated. Moreover, once you start sticking to a planned budget, you will probably want to make changes in your expenses to increase your savings. So, you will have to keep coming back and strategize your budget accordingly.
Budgeting is all about healthy financial life and a less burdened mind. Planning your budget will give you a sense of discipline in your life and allow you to live a life you want to live. So hold yourself accountable as you strategize your budget. Taking time to learn financial skills improves your financial literacy and puts your money to better use for you.
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Frequently asked questions
1. What is the best app for budgeting?
- Wally is an easy-to-use and handy budgeting app that is friendly with almost all currencies of the world.
2. How do I stop myself from overspending?
- Reduce your credit card spending
- Avoid saving your card details on shopping platforms
- Cut down the money you spend on food and coffee by switching to home-made alternatives
- Review your ongoing memberships and subscriptions
- Keep tracking your spending
3. What are some examples of bad spending habits?
Here are some common examples of where we spend money unnecessarily that makes a dent in our savings
- Buying bottled water instead of carrying a water bottle
- Spending on buying daily coffee instead of making it at home
- Mindless spending on shopping websites
- Dining out too often
- Unused subscriptions and memberships
4. What is the 50-30-20 budgeting rule?
- The 50-30-20 rule is that you spend 50% of your income on essentials, save 20%, and keep 30% for your wants and desires.
5. What documents would you need to build your budget?
- Recent utility bills
- Credit card bills
- Bank statements
- Investment plan
- Loans and other debt statements
- Salary receipts