Budgeting Tips to Help You Plan Your Finances

Setting a budget is a crucial step in managing your finances and achieving your financial goals.

Finances can be challenging, especially if you are trying to plan for the future while not sacrificing your current lifestyle. Many people experience success with using a budget as a tool to help them save for the future and make the most of today.


What is a Budget?

Many detailed explanations exist to answer the question. However, at its core, a budget is a tool to help you determine how much money you have, what you spend it on, how much you save, and where your money goes.

Once you have a clear view of how and where you spend your money, you can use this information to help with future decisions.


Why Have a Budget?

One of the most challenging parts of dealing with finances is keeping track of where your money goes. It is common to believe that you will remember what you spent and the purpose, but a large amount of money can fall through the cracks this way. Setting up a budget can assist you in several ways, including:

  • A budget helps to build your financial stability.
  • Saving for retirement is easier if you include the amount of money you want to save in your budget.
  • It can help you avoid overspending if you adhere strictly to your budget.
  • You get a clearer picture of your spending habits. You will be able to see patterns in how you deal with money and use the information to build discipline into your finances and reap the benefits of your actions.
  • Budgeting will help you reach long- and short-term goals. When you stick to your budget, it can serve as a roadmap to help you.


How to Set Savings Goals

When the topic of goals is brought up, many people often think about retirement. Preparing for retirement is vital, and a satisfying lifestyle once you retire is a worthwhile goal. However, having and meeting short-term goals gives a sense of accomplishment that can motivate you while you are working toward your next goal.

Using the SMART method can make setting goals easier if this is an area of struggle.

  • Specific – Vague goals are challenging to achieve. Find specific steps you can take to turn your goals into reality. For example, your goal might be to attend culinary school. Find out what is required and how much you will need for tuition. Then, as you achieve each goal, you can go on to the next.
  • Measurable – Identify ways that let you see your progress. If purchasing a car is your goal, decide how much you can afford to set aside each month. Watching your money grow will help keep you on track.
  • Attainable – Make sure the benchmarks you set can be reached. You are setting yourself up for disappointment if your goals cannot be met. The goal is unattainable if you aim to increase your Super and put in $2,500 a week, but you now need credit cards to pay for daily necessities.
  • Relevant – Ensure that the goals you are working towards will still matter to you when the time comes.
  • Time Bound – Make a realistic timeline to help you stay on track. You will set yourself up for failure if your time frame is unreasonable. Additionally, if you have no time constraints, you may put off action until it is too late.


How to Set Up a Budget

There are a few steps involved in making a budget. These include:

  • Determine why you are making a budget – Understanding why a budget matters to YOU is vital. By understanding your motivation, you can keep working towards your goal.
  • Track your spending for a month – You need to see where your money goes before you try to rearrange your finances. During this month, spend as you usually do. If brunch with gran and mum every Sunday is a usual activity, do not stop during your month of tracking your finances. This will allow you to see where this activity fits in your budget. You may discover that skipping brunch a few times a month saves you a significant amount of money.
  • Learn how much money is coming in and your monthly expenditures – Use a simple approach involving three categories:
    1. Commitments – These are payments you are legally bound to make, like your car loan or rent.
    2. Living Expenses – These payments are for things that are necessary but are not always the same, like food or utilities.
    3. Lifestyle Expenses – These are expenses that are directly influenced by your decisions. Clothing, entertainment, and dining out are examples of lifestyle expenses. This is the area where the most cuts are usually made.

Insight from tracking your spending and separating your expenses will be helpful as you make your budget. You can identify areas where your spending is well-controlled and those needing improvement.

Allocate a portion of your budget to building and maintaining an emergency fund.


Building an Emergency Fund

Your life will always have moments to surprise you. Even if things appear to be going smoothly, you never know when a medical emergency or expensive repair may occur. Also, you may hear words similar to, “Sorry, but the shop is closing, and you have no job.” Having money tucked away to help you pay for what you will need when the unexpected happens is fantastic. However, an emergency fund takes time to build.


Starting an Emergency Fund

  1. Open a separate account and, if possible, set limits for your access. While you want to be able to get the money when you need it, avoid carrying a bank card that is attached to it.
  2. Arrange for automatic deposits into the account. Go over your budget to ensure you are depositing a manageable amount that will not take away from money needed for other expenses. Even if you start small, your money will add up over time.
  3. Save any extra money that you get. Be sure to put a portion (if not all) into your emergency fund, whether it is a cash gift or a bonus from your job.


Emergency Fund FAQs

  • What is an emergency fund?
    Emergency funds are savings you have set aside to pay for unexpected (often expensive) events.
  • How much should I have in an emergency fund?
    While there is no definitive amount for an emergency fund, most financial experts suggest that you keep between three and six months of your salary in an emergency fund.
  • Can I spend from my emergency fund if I am short of cash?
    People with emergency funds are sometimes tempted to take a little money out for a special occasion or to treat themselves. They usually intend to return the funds to the account, but this often does not happen.


Small Ways to Save Money

If you are waiting for an impressive windfall before you begin to save your money, you may have a long wait. The best way to begin to save money is to start where you are most comfortable. Here are five ways to save your money.

  1. Automate your savings – You will not miss what you never see if the funds move straight from your pay to a savings account.
  2. Look for better deals – Take some time to look at your bills to see where your money goes. Consider switching to cheaper providers for cellular service, utilities, and insurance coverage.
  3. Review your memberships – You may be surprised by automatically renewing payments for streaming services, delivery apps, or gym memberships. You may need to find and then cancel the ones you do not need.
  4. Dine in more often – The idea of grabbing fast food or other take-out meals usually sounds great when you are rushing home from work. However, these types of food are among the worst for your health and wallet. This does not mean you can never eat out again, but budget for dining out occasionally.
  5. Plan meals ahead of time – Spending time choosing meals can become a family activity, and everyone should be able to pick a favourite.

No matter your financial situation, a budget can help you control your money. There are several kinds of budgets, but most people prefer to start with a simple method. If you would like to learn more about budgeting and building wealth, please get in touch with us at Grace Life and Wealth. Our team of experts can guide you while you are getting started and partner with you as you navigate the various phases of your life.


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