According to some recent studies reported by https://www.forbes.com, only 40% of Americans bother to make a monthly household budget and more startlingly, only 37% have $500 saved away for emergencies. Budgeting is something that most of us tend to dislike instinctively and tend to avoid because we think it to be restrictive and intimidating. The real truth is that most often we have no idea of what our expenses are and are generally unprepared to deal with financial emergencies. However, it is important to realize that it is only by creating and maintaining a budget that we can set our finances in order and afford the lifestyle that we deserve. Comprising mundane things like rent payments, payments of utilities and conveyance or sustaining our hobbies, paying for education and self-development, a budget is nothing but a representation in figures of our necessities and aspirations. By examining the figures, we can figure out whether we are progressing to our goals, how to cut back or reallocate funds to specific objectives, determine if we can create the lifestyles we want and even prepare to meet potential emergencies and downturns. For all those who think there’s nothing more painful than making a budget, some useful tips to make it less taxing and productive:
Keep It Simple
Since most of us have some idea how complex national budgets and organizational budgets can be, we automatically think that household budgets also need to be equally complicated. However, the best budgets are those that are kept simple. You can easily do this by choosing a simple budgeting system as well as devise an easy plan for holding yourself accountable for deviations. Most budgets fail because they are too complicated and while it may be very tempting to account for every penny that you are spending, it can soon become very tiresome and easy to let things slip and ultimately abandon.
Get the Tools You Find Comfortable and Practical
While it is still possible to use a plain notebook and a pencil to create a household budget, you will find it easier to balance the books by using simple computer-based tools that you can find in abundance. While there are literally dozens of budgetary tools that are available, it can help to read the reviews and then selecting one that you find easy to operate without going overboard with the number of features. Some of the simple spreadsheet-based tools are the best for beginners because they have all the formulas built in and you can always upgrade to the more advanced versions once you gain confidence and determination.
Find out How Much You Earn
Since budgets are only effective if you spend within what you earn, you first need to find out what you earn. For most people who are employed on a salaried basis, the figure does not vary from month to month, however, if you are self-employed or work in an industry where there are large swings in the income, you may need to be very conservative and take into account an income that you know is guaranteed or make budgets from month to month spending what you earned the previous month. Whatever be your earning potential, once you have a number to put against your income, you need to use that to make a budget ensuring that not only you stay within it but also try and keep aside a surplus as your savings.
Establish How Much You Need to Spend
When you are spending, there are two types of expenses that you need to reckon with; essential and discretionary. For example, the expenses that you cannot avoid such as the mortgage payment or rent, payments for the loans that you have taken to buy the car or to service the student loan, insurance premiums, utilities, groceries, and other living expenses. Then there are discretionary expenses like dining out, entertainment, vacations, fancy clothes, and gadgets, etc. that you can only afford if you have sufficient surplus after you have met all the non-discretionary expenses. If you find that your income is more than your spending, you are in a happy situation and should focus on saving as much as possible to safeguard yourself from downturns or large planned expenses.
Budget to Achieve Your Goals
For most people, this is usually the most productive and satisfying part of the budgeting exercise because you get to choose what you can work to achieving. For example, if getting out of debt is a major objective then you can save up more with effective budgeting and repay the debt as quickly as possible. You can also think in terms of saving enough for the vacation of your dreams of for making the down payment for a house or anything else that you might have been hankering after. You need to boil down the objectives to dollar amounts so that you can have a stronger focus on achieving them.
Share the Budget with Your Spouse
A budget is not a secret document; in fact, if you are in a relationship, you should ensure that you share your financial status and ambitions so that your budget and spending habits don’t come as a surprise. Rather, sharing this information will bring your partner on the same page and ensure that you get the necessary support to make your budgeting exercise a success and your financial goals a reality. As with any communication, you must be clear regarding what you are intent on doing and what it entails; remember people do not like surprises and being taken for granted.
Sticking to a budget can be somewhat painful if earlier you had been leading a happy go lucky lifestyle. If you think of the budget as being a nuisance, you are going to have trouble implementing it but if you think it to be a strategy to achieve important financial goals, you will accept it and treat it like a supportive friend. Committing yourself to the budget is extremely important as is keeping it updated frequently.
Author Bio: Kelly Wilson is an experienced and skilled Business Consultant and Financial advisor in the USA. She helps clients both personal and professional in long-term wealth building plans. During her spare time, she loves to write on Business, Finance, Marketing, Social Media. She loves to share her knowledge and Experts tips with her readers.
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