Financial gurus will tell you that the best thing you can do to achieve better financial health is to master the art of budgeting. And if you have ever attempted budgeting, you know how hard keeping track of your income and expenses, planning, creating financial goals, and saving money, can get. But it doesn’t need to be. Here are three easy steps to better budgeting. Let’s get right into it.
1. Set goals and track your money
Remember, the end goal of budgeting is managing your finances well. And it all starts with creating an achievable financial goal. For instance, you could decide you want to save a specific sum of money by the end of the year or save funds to buy a product like a car or a house in a couple of months. The key is ensuring your financial goals have a set limit money-wise and have a predetermined time to achieve them. When you decide on financial goals like this, you are more likely to stay on top of them.
Once you’ve narrowed down on a financial goal, the next step is creating a cash-flow plan. Start by making a note of all your income sources and determine your spending. Once you do this, look at your expenses and segregate them into essential and non-essential expenses. This will help you recognize which expenses you can cut down to save money.
Keep in mind that essential expenses may include everything from your monthly rent, taxes, debt repayments (if any), taxes, groceries, medical bills, utilities, etc. While non-essential expenses may include everything from your occasional splurge at the mall, travel, dining out, etc.
2. Adjust your spending
Now that you know where your finances are going every month, you can decide how to manage them to save more. For instance, you can decide to prioritise essential spending and allocate a portion of your monthly income towards them. Or you can choose to manage your debts by refinancing them to make repayments easier. If you want to save even more, you can choose to cut out a few of your non-essential spending too.
A word of caution
Once you realise how many non-essentials you can do without, it might be tempting to cut back on all of them at once. However, this is the easiest way to fall off your budgeting plans. Instead, cut back on non-essentials gradually to stay on track with your budgeting goals.
3. Stay on track
Your income, spending habits, expenses, and financial goals will change over time. Hence, your budget will need to change as well. So, perform an audit every few months to understand if your current budget specifications align with your needs, spending trends, and financial goals. If not, come up with a more sustainable plan you can follow through.
Remember, the goal of budgeting is making sure you can manage your funds optimally based on your needs and financial goals rather than limit your spending. So, work towards it accordingly. Duly track your income and expenses every month manually or using a tracker. This way, you will have insights into where changes might be needed.
Over to you
By following these three simple steps, you will find that setting up a budget is a breeze. That said, budgeting is just the starting point on the road to financial health. The next step is growing your wealth through investing. If you need an effective beginner-friendly investment platform, Tata Capital’s Moneyfy app can help.
Moneyfy is ideal for new investors because it allows you to assess your risk profile, set investment goals, and view investment options tailored to your needs. So, download the app and start investing today!