7 Tricks for Making the Best Budget

Financial caution, budget development, monetary balancing, savings growth and more. These terms sound scary, don’t they? Making a budget, especially if it is for the first time, can appear to be an extremely daunting and challenging task.

The truth is that it sounds more terrifying than it actually is. The best way to handle this so-called stressful task is to firstly realize that it is not that at all! Simplify it by comprehending what the essence of a budget is. Primarily, it is a written down plan of your funds and how it will be managed.

You are the one in control, the one making decisions and the one to make any final calls on its allocation. Hence, there is nothing to be scared off! Isn’t that great? Now to make you feel at ease even more, let us share with you 8 wonderful tricks that will help you in designing your budget.

  1. Make Your Favorite Tea

You must be wondering why the numero uno tip is to make a cup of your favorite tea. The reason is that the most important stage in crafting your budget is to make sure that you are in the right frame of mind. Being calm and mentally at peace is strategic in creating a realistic and an efficient economic strategy.

So, put the kettle on and boil some water. Take out that colourful mug that your niece or grandma gave you and pour some tea in it. We recommend chamomile or green tea as it helps you to relax and perhaps smile a bit even. Switch on some soothing music to help you concentrate and gather your supplies. Take out some vibrant highlighters or pencils along with a pad of paper. Or if you are tech-savvy and prefer a more automated way, then feel free to tap into the magic of Excel or any other spreadsheet program.

  1. Soul-Searching Time

Now that the ambiance has been set, reach into the deepest corners of your soul and think. Think why you are making this budget and figure out what your source of motivation is. What is it that drives you to be undertaking this action? Getting to the root cause will help you stick to your budget in the long term. Are the indigo waters of the Mediterranean Sea calling out your name in Santorini, Greece? Is it desire in owning a new home? Or building a pool of funds to pay for that Ferrari once you retire? Or are you trying to become debt free?

Identify and establish both long term and short term goals. This way, you will be motivated to set a small sum aside accordingly. Short term goals can include saving up for a new car, a vacation or a down payment on a property. Long term goals would include retirement, college funds for your children or capital to launch a new business. To achieve these objectives, you may have to compromise on certain activities such as not watch the latest Marvel superhero movie on Imax or try out that new Italian restaurant that all your friends are recommending. Knowing what you are striving to accomplish will make you feel stronger and more dedicated in your journey.

  1. Take Away Income

One of the most common mistakes that people make in budget planning is to not take into account what their after tax income is. It is imperative to fabricate a budget based on the disposable income that you actually come home with. Take your after tax, annual income and divide it into twelve parts to understand the number you receive at the end of every working month. This is the benchmark against which you will design your budget around.

  1. Truthful Patterns

Be honest with yourself when you are tracking your expenses and figuring out how much you spend on different categories: food, recreational activities, rent, insurance, transport etc. Take out receipts from the past couple of months or review your banking transactions to identify your spending patterns. This is a crucial step in understanding the volume of outflows and corresponding inflows. By doing this, you will be able to comprehend which areas you can reduce spending in order to save or to simply attain your desired budget outcome. This should also reflect infrequent expenses that may occur on a seasonal or quarterly basis. These can vary and include property taxes, vehicle insurance or homeowners’ insurance.

  1. Debt Freedom

It would be a perfect, utopian realm if we were able to exist without any format of debt in this day and age. Unfortunately, we all built up a little debt over the years. However, the secret is to balance it out and ensure it is not going out of control. Contact your bank and set up an automatic debit transfer of a certain amount to pay off whatever entity you owe. Whether it is a credit card or a personal loan, returning a specific amount every month will eventually win you your freedom.

  1. Separation of Accounts

If you find monitoring your financials complex if it is present only in one account, then open up others with specific purposes. Tap into a savings account and deposit your intended amount in. This way you will know not to touch that money until you attain your fiscal goal. A checking account will help you track your fixed outflows. Either utilize the same checking amount for your daily spending money or open another. Depending on your level of comfort and confidence, you can manage your accounts accordingly.

  1. Realistic Expectations

Ever gone on an extreme, fad diet with the hopes to lose 15 kg in less than a month? It must have involved you going to hardcore lengths and cutting back calories. It may work for you for the first couple of weeks, but then you will find it hard to stick to it. Losing weight is easy, maintaining is the challenge as you have to live by healthier choices. The same principle applies to budgeting.

Don’t cut back on recreational spending 75% suddenly. Take it slow and ease yourself and your partner into it. Measure what amount of your money goes into entertainment (with a time base of 2-3 months) and promise yourself that you will bring it down by ten percent or so. This way, you still save more and get to enjoy your life as well. It will gradually build your courage and enable you to stick to your budget.