One way to predict your future is to watch on how you spend your money today. Financial security doesn’t appear out of nowhere, you need to develop good money managing habits early. Most of us don’t want to think about budgeting, because we view it as a time-consuming activity. It takes time to record our income and expenses before we see the whole picture. However, if you plan to buy a house, retire comfortably or take that trip to Bali you’ve always dreamed about, budgeting becomes an essential part.
1. Track your income and expenses
To visualize the movement of your money, you need to record each transaction you make. After about a month, you’ll be able to analyze what chunk of your expenses is going to the rent, transportation, parties and starbucks. This will help you see a better picture of where you stand and where you can make improvements by spending less. You might be surprised to learn that you spend 65$ per month on your favorite caramel macchiato.
2. Set your financial goals
It can be anything from paying off a credit card debt to saving up for a Coachella concert next summer. When you have a clear goal in sight, it becomes easier to achieve it. Create a budgeting plan, set priorities and stick to it. Planning in advance will help you avoid unnecessary purchases. So when you are about to spend money, you would automatically think whether it’s within your budgeting plan.
3. Budgeting reduces your fear of over spending
No one fears darkness, only the uncertainty behind it. The same thing holds true when it comes to money. When you have no idea whether you’ll be able to make the next payment towards your phone bill, credit card bill, rent or gym membership fee, anxiety sets in. Budgeting your money helps you to be on top of your game by organizing your expenses (Yay more power to you!).
4. Saving builds wealth.
The simple budgeting trick is to follow 50/30/20 rule. The 50 stands for the percentage of your income that should be spent towards necessities such as housing, food and bills. The following 30 percent of your income should be used towards leisure activities such as snowboarding, new clothing, parties and a pair of sunglasses for your dog. The last 20 percent should be used to build your wealth. While the 50/30/20 rule is commonly followed, feel free to create your own that suits you. Like getting that beach body in the summer time, consistency is key to be successful in budgeting.
A philosopher once said that “a journey of thousand miles starts with a single step”. Starting your journey of budgeting begins with careful planning and discipline. There will be times when you would feel tempted to buy a latte instead of a cup of coffee for an extra dollar or two. While it feels good to treat yourself once in a blue moon, you need to remember your goals. Had you decided to buy lattes instead of coffees (assuming it’s an extra 1.50 dollars) everyday, you could have saved enough money to buy a round trip ticket to Punta Cana in a year.
Photographs by Giphy.
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