Whether you’re a student, a family man, a working mum or someone who’s close to retirement age, you could be guilty of overspending. This occurs when you have the money in your pocket or a credit card in your wallet, and you just cannot seem to resist the lure of retail therapy. Although there is absolutely nothing wrong in indulging yourself once in a while, doing so very often might lead you to have financial problems later on. This is especially true once you reach a point when you are simply living from one pay check to another due to the debts that you have already incurred.
The good news is that you can always use budgeting as a way to cope with the situation. Simply put, budgeting is planning how you would spend your money. You can set a budget for a week, a month or even a year based on how much income is entering your household. Once you’ve set aside funds for your necessary expenses and savings, that is already the simplest form of budgeting.
Ways to Better Manage Your Finances
If you would like to use budgeting as a way to better handle your finances, here are a things that you should keep in mind:
• Know where the money’s coming from
If you live in a household where both spouses are earning an income, for instance, how much money is actually coming in? From this amount, you can deduct the crucial expenses that you’d have to spend for including mortgage or rent, loans, utilities, food, school-related expenses, etc. By understanding exactly where the money is coming from, you will realize exactly how important it is to spend your funds wisely.
• Avoid unnecessary spending
Impulse buying is something that a lot of people are guilty of. When you make a stop at the gas station, there are items on the counter which you would unthinkingly spend on. Or when there’s a sale at your favorite store, you may think that you absolutely need to have that top simply because it’s sold at a discounted rate – only to realize later that you have only worn the garment once. To avoid unnecessary spending, set aside a certain amount that you will use to buy miscellaneous things for a week or a month. Once the funds are exhausted, stop buying anything unnecessary.
• Set aside a savings account which you can dip into for emergencies
One of the most important aspects of budgeting is setting aside a savings account which you can use for emergency expenses. You’ll never know when your kid might need a trip to the emergency room or the dentist, or when an all-in travel vacation package for next summer might be available. Once you have an emergency savings fund set aside, you would have the means to spend for these unexpected expenses.
You should also have a set of future-oriented financial goals. In budgeting, there’s no need for you to scrimp on things which are important to you, but there’s no need for you to overspend, either. The whole point of budgeting is to have the funds available during emergencies, while also living comfortably because you have the money to spend for all your basic needs.