Having a clear monthly budget is important in today’s economy. By allocating portions of your income for certain expenses, you can keep up with those expenses and maintain a healthier cash flow in general. A monthly budget also acts as your measuring stick, allowing you to see how you are doing with your personal financial management.
There is, however, one thing more important than having a clear budget, and that is sticking with it. Sticking to a monthly budget is actually more challenging than creating a budget in the first place. Worry not, because you can stick to your monthly budget easily with these 5 tips and tricks we are about to discuss in this article.
Start with a Realistic Budget
The first thing you want to do if you want to be more disciplined with your budget and expenses is creating a realistic budget to follow. Sure, you want to save 30% of your monthly income and invest it later, but that’s not always the right budget to set. If you still have a lot of loans to repay or you have income that fluctuate, setting aside 30% for savings is a tall order.
Creating a realistic budget starts with getting a clear picture of your income and expenses. The latter is easier to review and understand since you can simply use expenses from the previous month as your benchmark. As for your income, start with the regular ones and make changes to your budget as you earn more (or less) during the month.
Write Down Everything
With a realistic budget in mind, the next thing you need to do is document your incomes and expenses meticulously. The simplest way to do this is by writing down the money you earn and spend right after you earn and spend it. Don’t even wait until the end of the day to write things down; you’ll find it easier to document your transactions on the spot.
Fortunately, there are a lot of apps that can help you keep track of your income and expenses in an instant. Some apps will even scan your receipts and automatically add entries using the captured information. The more you get used to writing everything down, the easier it will be to stay in budget.
Remember that the goal is staying within your budget. That’s how you get to a healthier cash flow and improve your overall financial condition. In order to stay within the budget, you need to regularly review your expenses as well as the income you receive as the month progresses.
Once again, writing everything down – and using an app to help you do that – is important. With expenses tracking apps, you can always check expenses of certain types and categories at any point. You also have visualization of those expenses helping you understand your financial state better.
There are also apps that allow you to input your monthly budget as a benchmark. These apps will automatically tell you how you are doing at any point during the month and even recommends ways you can be smarter with your expenses.
Watch Out for Gaps
Even with the best budget in hand, there are still times when you are hit with an unexpected or uncalculated expense. I often forget about my car insurance renewal; I know a lot of people get surprised by the sudden need to pay insurance premium too. Other unexpected expenses like co-insurance and emergency home repairs also have the ability to create gaps in your budget.
The best way to deal with this type of situation is knowing the right financing option to use even before you have to face a gap in your monthly budget. Thankfully, there are plenty of short- and mid-term financing options you can now turn to depending on your specific needs and requirements.
It is also a good idea to set aside some funds for dealing with this type of unexpected expenses and emergencies. You don’t have to save a lot all at once if that’s stressing your personal finance too much. Set aside 2% to 5% of your income and build your emergency fund gradually.
Work with a Partner
Last but certainly not least, find someone to help you keep up with your monthly budget. If you have a partner that shares the monthly budget, this should be an easy task to complete. For singles and those who live alone, close friends and professional services are just a couple of clicks away.
Having a partner helps in many ways. At the very least, you have someone reminding you when you stop following the plans you set at the beginning of the month. Some of the apps we discussed earlier also support multiple users to make the whole process easier.
Use these tips to your advantage and you will find staying in-budget to be extremely easy to do. It will not be long before you start seeing a healthier cash flow and gaining better control over your personal finance.