Getting your budget in order
“Do I need a budget?” This is a question we’ve all asked ourselves at some point. And no matter who you are or what your financial position is, the answer is always YES. Getting your budget in order is important. Budgets are a great tool to help you stay on top of your money and meet your financial goals. Whether you’re saving up to buy a house or working on paying back your student debt, a strong, effective budget is essential.
Here are five tips to help get you started.
Be honest about your financial lifestyle
Your budget is only going to work if it’s realistic. If you currently spend 50% of your income on entertainment, immediately transitioning to a 0% entertainment budget is not going to work. Be honest with yourself about your lifestyle. It’s important to be honest about what you know you can afford to cut out and the habits you’re unlikely to quit. This way, you can tailor your budget to accommodate these pesky habits so they don’t become a huge deterrent, pushing you off your budgeting course.
Make sure you have all the right information
To build an effective budget, you need to have all your financial information in order. You need to know all your sources of income, your total fixed expenses and your variable expenses. This means looking at your pay stubs, tax receipts, utility bill, mortgage payments, groceries, etc.
Spend time going through all the inflows and outflows of your bank statement each month to get a clear idea of how you’re currently spending your money. This way, you can develop a budget that ensures your income is covering all your essential bills and the remaining amount is used strategically.
Debt is often one of the leading reasons we decide to start budgeting. Without a solid plan in place, debt can begin to feel like an unmanageable weight.
When starting your budget, it’s a good idea to begin by looking at your debt. Find the largest obligation bearing the highest interest rate and structure your budget around paying back this sum as quickly as possible. You want to get rid of the most expensive and pressing debt first. Then your budget can transition towards actively saving you money rather than paying others back.
Let apps help you!
If staying on top of your budget seems like too big of a task to do on your own, you’re in luck! There are so many great apps out there to help you create, manage and stick to your budget.
Some of our favourites include:
Arguably the most popular budgeting app, Mint takes a deep dive into your finances. Mint can create a budget for you, categorize your spending, and send bill payment notifications to ensure your day-to-day finances are always on track.
You Need a Budget (YNAB)
The best part of YNAB is the apps’ focus on education. Offering free financial courses to members, YNAB actively tries to educate users on financial health and strategic money habits. Beyond education, YNAB maps your financial situation by connecting to all your accounts and will help paint a clear picture of your current financial position and spending behaviours.
Great for those of us who have trouble sticking to our budgets, Pocket Guard helps prevent overspending. By linking to all your financial accounts, the app will build you a budget that includes all your expenses and then will use the remaining amount as your spending limit.
Are you the type of person that’s easily tempted into impulse purchases? GoodBudget may be the app for you.
Rather than constantly analyzing your current financial position, GoodBudget helps you limit your spending in different life categories. You’re able to allocate a maximum amount of money each month to various items like food, clothing, entertainment and gas, and GoodBudget will ensure you don’t surpass this amount. At the end of the month, any money left over will go right back into your savings account.
Understand that no one’s perfect!
While budgeting is a great tool to help keep your finances on track, your budget can’t be the be-all, end-all. It’s inevitable that unexpected expenses will arise or that some weeks you will blow your budget on buying an $8 Starbucks drink every morning. But that’s okay. Getting your budget in order means different things to different people!
Life is ever-changing, and it’s impossible for your budget to always be exactly aligned with your day-to-day behaviours. When you do stray off course, it’s important to acknowledge the change, readjust, and get back on track with your budget. Spend less time worrying about your slip and more time focusing on moving forward with your savings.
It will take time to get your budget in order and find a system that works for you. But be patient. In the long run, having a strong financial planning system will pay off. Use these five tips as a starting point and soon, managing your budget will be a breeze. Let the savings begin!
Be sure to tune back in throughout the month of November for more from all of us at Centum Home Lenders. We are always willing to help answer your questions directly. You can get in touch with us here!