Photo by Thiago Cerqueira on Unsplash
Whether you live on your own, with a pet or with a big family, creating a budget and sticking to it is an important foundation for maintaining a happier and healthier lifestyle. Many people fall into believing that financial stability is a constant struggle but really, it’s simply a matter of practicing some good habits and avoiding the slippery slopes of frivolous spending and debt. Here are five steps to get you started on a stronger budget:
1. Don’t Accept Unnecessarily Huge Loans
This applies to personal loans, car loans and even your mortgage. Many big banks, creditors and lenders will offer you more money than you actually need as a sweetener, only to trap you into expensive repayments and high-interest rates. If you are facing financial difficulty and cannot loan money from a relative or friend, opt for quick cash loans from not-for-profit lenders. They cap their loan amounts, have much smaller fees and may even provide additional financial help services should you need assistance.
2. Monitor Your Spending
There’s no need to go overboard with aggressive list-taking and a spreadsheet for everything you do. Perform a check-up on your transaction history for the last few months and look out for any trends or patterns of spending you would consider excessive. You may be surprised by what you find; there may be old bills or account fees you’ve forgotten you are paying. Make the right calls to eliminate these and then look out for fees or charges you can reduce for things like billers and subscriptions.
When you’re more conscious of your spending, you can avoid falling into these situations. Be sure to perform these quick check-ups at least monthly from here onwards to identify unwanted spending.
3. Identify Your Living Expenses
The foundation of your budget should be your living expenses. Get your calculator ready while you are undertaking your transaction check-up and add up the total cost of your basic needs. This includes: your rent, bills, transport costs, health, insurance and your average grocery spend. If you plan to aggressively save for a while for something like an emergency fund (see below) this is your bare essentials budget.
4. Prioritize A Separate Emergency Fund
If you do not have an emergency fund in any shape or form, then this is your first priority after paying off debt. Regardless of how prepared and organized as you may be, emergencies and unpredictable events can occur at any time. That’s why having emergency savings is so important. You can at least gain some control over minimizing the damage afterward.
Set aside at least three months worth of your living expenses in a separate bank account or a locked account for emergency use only. If you can’t spare the cash at this moment, stick to your bare-essentials budget until you can make up the number. It’s a small sacrifice to make for peace of mind.
5. Set Goals, Not Restrictions
The purpose of a budget is to help you and your family, not inhibit you. When looking over your budget, make sure it incorporates sustainable and realistic limits for your daily expenses, a safety net (your emergency fund) and enough left over to meet your goals. You want your budget to keep your finances safeguarded and give you peace of mind when going about your day, not to stress you out trying to keep frugal.
Start following these five steps today and soon you’ll be granted a more stress-free and secure quality of life!