The word “budget” doesn’t have a very good ring to it for most people. It can conjure images of deprivation and scarcity but with some introspection and honesty the B-word can easily be turned into an ally instead of a foe.
If you’ve never made a budget before or would simply like to know more about the matter, here are a few tips:
Know your current stats. Feel like you’re always on top of your finances? Kudos! Maybe you should skip the rest of this article; there might not be anything here for you anymore.
Feel like you need to improve on some aspects of your finances? Great job! The first step to addressing a problem is acknowledging that you have one. It’s nothing to be ashamed of. It’s going to be more shameful if you keep hiding the problem until you can’t anymore.
Be honest with needs and wants. Let’s face it, a life without a few guilty pleasures here and there doesn’t sound very appealing. Maybe you “need” that cup of artisanal coffee every now and then or that expensive trip to some faraway city you’ve always dreamt of visiting. That’s fine! Go get that coffee, go book that trip!
“What the hell is this guy talking about? I thought this was about budgeting,” you might be asking now. Sacrilege to the budgeting gods, right? But budgeting shouldn’t be about deprivation — it should more or less be about being in control.
Why should you stop yourself from getting something that you really like if you can afford it? Likewise, if you know that your budget doesn’t have room for a certain guilty pleasure right now, why keep pining over it and make yourself feel miserable? The keyword here is “control”.
Have a system. So we’ve established that control is key but keys have to unlock something for them to be considered useful. Let your newly forged key open the door to your budgeting system. You could go as high tech as you want, using cutting edge personal finance software, or go the route of having different jars or envelopes for each spending category.
“Wait, spending categories?” Yep, spending categories. Your expenses shouldn’t be just in one giant lump. Have simple categories like basic needs (utility bills and groceries), simple wants (eating out or going to the movies), savings goals (start preparing for that trip to Bali even before the next fare promos arrive), investments (this might be a long shot for some, but something to look forward as you get better at budgeting), and the list could go on and on. Make categories that work for your specific needs and wants, and keep them as simple as you can.
It’s okay to make mistakes. Alright, you splurged on eating out more than you planned for. Well, what’s done is done, it’s no use crying over spilled milk. You just have to move on and forgive yourself for it. For your next budgeting sessions, try to consider if you’ll need to increase the money you plan to spend for eating out and decrease other categories.Or if you should really try to be more disciplined when it comes to eating out.
Think beyond the paycheck. It doesn’t feel great to be always waiting for the next paycheck so that you can have money to spend. One of the ways to avoid this is using the previous month’s pay to cover this month’s expenses. For example, your salary in February is what you’re going to be spending in March. This may be difficult and it could take a long time as you tuck away a few extra pesos until you get a month’s worth, but the stress of not worrying when the next paycheck will arrive is definitely worth it.
I’m not claiming that these are the best tips nor am I preaching them as universal truths, but I’ve found them to be helpful and hopefully they can help you be more in control of your money.
Ron Gutierrez is a financial advisor and contributor at MoneyMax.ph, the Philippines’ leading comparison website for insurance, credit cards, and loans. We want to help you save money through free and fair financial information, so please tweet us: @MoneyMaxPH, like us on Facebook: MoneyMax.ph, and email your comments to firstname.lastname@example.org. For more information, visit our website: www.MoneyMax.ph