So you’ve recently decided to start budgeting in order to really take a look at your expenses and how much money you really spend on a regular basis. Perhaps you’ve decided to get yourself a little booklet and record all of your money, or maybe you’ve decided to take a more serious approach and lock down every expense so you can keep an eye on every penny you spend. This is a fantastic start to help you save more money, but what happens when the numbers don’t add up or you seem to lose more money every month than you think?
Let’s face it, unless we have total control over every single penny that comes in and goes out and we record it, we’re not going to get a very accurate measurement of our budget. However, we can obviously strive to keep track of every bit of money we spend. So in this article, we’re going to teach you a couple of tips on how to keep your budget on track and how to make sure you don’t make any mistakes that could end up plunging you into the red.
How Honest Are You Being?
You’d be surprised at how dishonest some people can be with their own budget. Whether it’s recording their income at a lower number so they have a bit of breathing room for their purchases or only estimating monthly expenses, this can lead to some very glaring mistakes in your budget and will spiral out of control, causing many issues in the future with the accuracy of your financial situation. As a result, your budget is never going to quite be accurate and this could cost you in the future.
Instead, make sure you’re always recording accurate numbers when budgeting. This means recording your income accurately, it means entering accurate monthly costs instead of guessing and it means being more honest with your money. Don’t hide a little each month for your “personal” needs. Instead, record this personal use of your money so that you track every single penny of your income.
Don’t leave out any items when you go shopping, don’t forget about “small” purchases even if they seem insignificant and track every penny you spend so that you can subtract it from your budget and give yourself an accurate number of how much money you really have.
Make an Entertainment Budget
When budgeting, something that many people seem to skip out on is the entertainment budget. This is essentially money you leave for fun things such as eating out, going to the movies or even going shopping. If you’re not giving yourself a budget for enjoyment, then you’ll quickly find yourself giving up trying to set a budget and save money.
It’s fine to dedicate a portion of your wages to fun and entertainment. If you don’t, then you’re going to fill completely swamped with work and have very little time to yourself for enjoyment.
Not Using Software
Human errors are very common when it comes to budgeting, so we’d definitely recommend that you use budgeting software to record expenses. Whether it’s a program on your laptop, an app on your phone or cloud software you can use everywhere, personal budgeting apps can help you keep your expenses in check and makes it very easy for you to track your history and purchases.
It’s much better than using a paper method because the records can be damaged or incorrect, and it also saves you a lot of time which can convince you to rely more on budgeting in the first place.
Wants vs Needs
Remember that there’s a big difference between wants and needs. Wants are generally excess things that you think you need. For instance, you might classify some clothes as “needs” before you “need” to look good for a party, but the reality is that it’s a “want” because you probably have plenty of clothes in your wardrobe that you can use.
However, you can’t be too hard on yourself when it comes to wants vs needs. For instance, many people would consider driving their car as a “want” because they can just as easily take the train or bus. However, these types of decisions depend on your circumstances. Perhaps your car is needed by the family for the morning carpool, or perhaps you drive to and from work to meet your schedule demands.
What Happens When You’re Really in the Red?
If you’ve realized that you made a mistake that pushed you in the negative, then the most important thing to do is not panic. If it’s urgent, such as needing to pay for a vehicle or home repair, then you may want to consider a fast and convenient New Horizons no guarantor loans. Of course, we don’t recommend this unless you desperately need the money, but it’s a good way to ensure that you can cover the costs of whatever you need to pay for in a pinch. Make sure you’re capable of paying it back and try to pay it back as soon as possible so that you’re not at risk of incurring extra interest charges.
If you find that you’re constantly in the red, then it’s time to make a couple of changes to ensure that you’re spending money that you actually have instead of money that you think you have. To do this, here are a couple of tips to cut down on expenses:
- Consider adopting some frugal practices – Being frugal includes spending less on unnecessary items and thinking more about the value of a purchase before you spend your money. However, do remember that there is a big difference between being frugal and being cheap!
- Cut out expensive entertainment – Whether it’s an expensive cable TV subscription or a fast internet speed that you don’t need, you need to find ways to cut down on expensive entertainment so that you can save money.
- Tighten your budget – Budgeting is an incredibly important aspect of life, so make sure you’re always being hard on yourself when it comes to expenses. Record every expense and do it properly so that you can see where you’re spending too much money.
- Make sure you save – Saving money is another important task when budgeting. Even if you’re just throwing in a couple of pounds into a piggy bank, it adds up over time and as you build up that habit, you’re going to find it much easier to manage your finances whenever an emergency pops up.
- Live a lifestyle you can actually afford – Most of our budgeting issues stem from living a lifestyle that we can’t really afford. For instance, if you love going outside and eating at fancy restaurants or going out with friends to clubs every Friday night, then you’re obviously going to be lacking in money. Make sure you realize the financial situation you’re in and make sure that live a lifestyle that actually suits your income and financial situation.
If you end up in the red then it’s not the end of the world, but it can be hard to get out of it if you’re not paying much attention to your financial situation.
To close off the article, we can’t stress enough how important it is to remain honest to your budgeting system and always record every little thing. When your budget stops making sense, then you’ve probably made a mistake somewhere and you need to look back at what you’ve missed out or forgotten and correct the mistakes before it spirals out of control.