budgeting-tips Budgeting tips

If the thought of a budget and sticking to a spending plan makes you want to hyperventilate, take a deep breath and count to 10, literally. These 10 insights may just shift you from panic mode to enlightenment when it comes to budgeting.

1. Do life… on your own terms, and with your own pocket in mind.

Nothing less will do. You are not the Joneses and there is no need to keep up with them. Sure, dream big and be ambitious, but make sure your financial plan and what you do with your money matches your dreams while simultaneously taking your reality into account. Set milestones you would like to reach in the short, medium and long term. For instance, you may in the short term like to repay your debts, bring down your expenses, start a degree or get married. Your medium-term goals may include a trip to Vietnam or starting a family, and in the long term you may want to retire comfortably and live on a Mediterranean yacht. Once you know what your goals and dreams are, you can start thinking about the financial implications and the steps you need to take to make it happen.

2. T stands for TRACK.

Start tracking your income and spending. That calls for creating and implementing a realistic spending plan. Start with your income and use your bank statement to see what you’re spending every month to create a table of your income and your expenses. Don’t forget that the little things add up. An honest view of what you are spending on necessary items and non-essential items, and whether your income exceeds your expenditure, will enable you to better judge how to adapt your monthly spending. See where you’re able to cut down and make trade-offs if your expenses exceed your income.

3. Automate to simplify.

Consider the benefits of automatic debit orders for recurring expenses, as close to pay-day as possible. Once all of those amounts come off, you’ll know how much you have to work with for the rest of the month. Then try to stick within your budget and only resort to your credit card if you absolutely must.

4. Ask yourself: How will this add value to my life?

Before you buy something, think about how it will improve your life. Is it a need, or is it a want? Is it something you must buy, or can you borrow it or even do without it? Does it have to be the top of the range version? Before you go to the checkout counter, think about your purchases – there may be one or two expensive items in your trolley you will never really use. A good rule of thumb is that if you still want something after you’ve thought about it for five days, then maybe it’s worth it. If not, you should probably take that money and put it towards your emergency fund or debts instead.

5. Plan for emergencies. Don’t be caught by surprise.

If you haven’t started doing so already, put cash into a separate savings account on a regular basis, building a ‘nest egg’ for life’s unexpected emergencies and curve balls.

6. Plan a life of confidence.

Success is no fluke; and financial success requires as much careful planning as any other form of success. That means you have to acknowledge and understand what is required to manage life’s financial realities. Saving money for a rainy day or your old age is imperative to ensure that you and your family will financially survive the unexpected – whether it is illness, disability, or loss of income in any form. So, make sure your budget takes into account the need to plan a life of confidence.

7. Use debt wisely but remember that cash is king.

Set aside desire and instant gratification and be honest about the need to make a big-ticket purchase immediately. If you cannot think of a good reason to buy something here and now, why not save up for it instead of buying it on credit? Once you’ve saved enough, you may find you don’t want or need it anymore, in which case, you can decide whether to add this to your other savings or buy something you really need. On the other hand, debt is inextricably part of our financial lives – and it can either make or break your budget and your financial planning. First off, know the difference between good and bad debt. With a home loan, for example, you’re acquiring an asset and are likely to benefit from capital appreciation over time – and taking out a student loan to fund a degree, for example, can be offset by the lifelong earning potential. Exorbitant debt on depreciating assets like cars and unnecessary items are harder to justify. When you have debt, make sure you pay it back in a smart way, i.e. prioritise paying debt with the highest interest rates first, while also focusing on your smallest debts which can be paid easily. Sometimes, taking out a fixed interest rate personal loan to help consolidate your debt is also a good idea.

8. Be tax savvy.

Firstly, file your returns on time to avoid late penalties and understand what deductions you may and may not claim for (for example, if you can prove you have a rental property, keep all your slips and invoices for maintenance and repair, as you may be allowed to claim certain amounts back). Additionally, when deciding how to save, you can enjoy some tax breaks when investing in a tax-free investment account as well as retirement annuities up to a specified amount.

9. Call in the help of a professional.

Creating and committing to a budget is not a once-off exercise and you are likely to boost your confidence and chance of success if you make use of an expert. Just as you would approach qualified professionals to support your physical and mental well-being, the benefits of navigating your journey with a qualified professional financial adviser at your side can make or break your success.

10. Never lose hope.

Remember that you are not the only one battling to budget and sticking to it. Never give up, no matter what or how many times you slip up. Your financial success and confidence are far more dependent on how well you manage your money than how much you earn.