Let’s talk budgeting. Did I just hear you groan?
Unless you’re an accountant or financial consultant, there’s a good chance to hate budgeting. It’s one of those chores like washing the dishes or vacuuming the floor…no one wants to do it, but it has to get done. And the longer we avoid it, the more complicated it becomes.
But it’s time to take the fear factor out of budgeting. Because it doesn’t matter how much (or little) money you have, writing it down empowers you to take control of your finances, instead of them controlling you.
When it comes to home loans or dream investments, becoming a better budgeter is also hand, because it can equip you to save more, invest more, and get ahead on repayment.
To stay on top of your finances, there are two broad approaches you can take.
The first is to plan how much you’ll spend on each category (groceries, entertainment, etc) each month. If you stick to your budget, you’ll know in advance how much you’ll save. Consider using an app to track this, or write it down each week so you can see what is coming in and out of your account.
The second approach is to throw out the budget and focus on saving instead. We know, you just gasped. But hang with us. This approach requires you too:
Decide how much money you want to save each month
Set up an auto-transfer to move this amount of money from a transaction account to a savings account whenever your salary gets paid
Spend whatever is left in the transaction account, however and whenever you like (we recommend budgeting this to cover essential costs).
The first approach suits people who want to pay close attention to their money, while the second is for people who want to ‘set and forget’ their savings.
Whichever approach you take, a good place to begin is to review your last 12 months of expenses, to see how much you’re spending and on what things. You can use that information to identify areas of wastage and set savings targets. And then, you can figure out what option suits you best.