Having a healthy relationship with your finances is the best way to get to the top and get a grip on where your money is going month-in and month-out. We all have been in a situation where we get our wages and within a flash, there is nothing left of it and we simply cannot explain where it went. This is why having a solid budget you can stick to will help you manage your spending and ultimately your finances are key to achieving a little more financial freedom.
In this article, we take a brief look at different strategies you can apply to ensure you draw up and stick to your budget, easily and stress-free.
#1 Categorise Fixed Expenses
This is not too difficult, in fact, you should probably have a fairly good idea of where your money is going each month. Fixed expenses include things like rent, mortgage, gas, debt and accounts, groceries. Even though something like groceries is not really a fixed expense, you should have an idea of what you spend on major items per month, more or less. You can use a program like excel to list these items and stipulate the amount of each. Remember to include your income on this sheet as this will clearly indicate if you are spending more than what you are earning.
#2 Track Your Spending
Keep a tight grip on your spending habits by keeping yourself in check when out and about. It is very easy to simply grab the credit card and swipe for something you want but don’t actually need. If you have put aside dedicated time to spend on your finances, you should get a better understanding of where your money could be used more efficiently, simply by looking at your spending habits.
#3 Itemizing Your Priorities
We mentioned credit or debt in point #1 above. Now, before you can actually budget effectively, you also need to understand where your attention is needed. If you are struggling with debt, you probably should focus on getting this out of the way before you can spend money on lavish trips to Spain. If you have very little debt, and you are able to commit to paying a definite amount off each month, you will probably be able to also put some money away. Saving is a big priority when it comes to managing your finances. Know what is needed where, and take it from there.
#4 Automate and Repeat
Once you have everything set up, you should be able to know exactly how much you have to spend on what you need. Always leave some space for other spending and activities, this will ensure you have a positive attitude towards your finances, and positivity is contagious! What we mean by automating, is that you should use a tried and trusted method of tracking your spending and earnings that minimises stress and doesn’t take up too much time. Get your statements automatically from your financial service provider, use a program or app to type in your fixed expenses, and adjust as needed.
If this sounds like too much effort, you can always use this guide written by Ramit Sethi.
We hope that you have found this article insightful and that you will be able to manage your finances more efficiently in 2018. If you have any questions or would like to chat with one of our team members at The CBT, feel free to give us a call.