How Do I Create and Stick to a Budget?

Managing your money can feel really stressful but with clever planning and a consistent budget the process can become seamless. A well-organised budget can not only help you manage your money more effectively but it can also play a huge role in achieving your financial goals.

Whether you’re saving up for a holiday, planning to pay off some debt, or simply trying to make the most of your income, creating and sticking to a budget can help in every area of your financial life. In this blog piece, we will give you some tips on how to start and maintain a successful budgeting plan.

Understand Your Financial Situation

Before you can create the perfect budget, you need a clear picture of your current financial situation. You can start by tracking your income and expenses including the following;

Your Income: List each area you receive consistent income. This can include your salary, commissions, and any other revenue streams.

Your Expenses: Record your consistent monthly expenses, such as your rent or mortgage, shopping, car finance, and optional extras like the cinema or restaurants. 

Use bank statements, receipts, and financial apps (like GLOSS Vault!) to ensure you’re able to see all of your transactions in one easy place. Categorising your spending will also help you see where your money is going and highlight the areas for potential savings.

Is It Important To Set Clear Financial Goals?

Having specific financial goals will give you a purpose and direction to stay consistent. Your goals could be short-term (saving for a holiday, a new game, or a watch), medium-term (buying a new car), or long-term (retirement savings). 

Clear goals will help you stay motivated and guide your budgeting decisions month by month.

How Should I Budget?

Now that you have a clear understanding of your finances and goals, you can now create your budget. Some of the best steps to follow are:

Determine Your Total Income: Tally the complete total of your regular monthly income, including any irregular income sources.

List Your Expenses: Break down your expenses into fixed costs (rent, utilities) and flexible costs (shopping, entertainment).

Categorise Your Funds: Place specific amounts in each area of your spending, for example place your average shopping costs in your shopping category and your monthly rent costs in your rent category. By categorising these areas it will mean that your total expenses don’t go over your total income. 

Tip: A commonly recommended approach is the 50/30/20 rule: 50% of your income goes to needs (housing, food, etc.), 30% to wants (dining out, hobbies), and 20% to savings and debt repayment.

How Do I Choose a Budgeting Method?

There are a variety of budgeting methods you can choose from. Here are a few popular ones:

The Letter Approach: Allocate cash into envelopes for different spending categories. Once your envelope is empty, you can’t spend any more in that category.

Zero Budget Balance: Assign every pound of your income to specific expenses, savings, or debt repayment, ensuring that your budget balances to zero.

50/30/20 Rule: As we mentioned above previously, this method divides your income into needs, wants, and savings/debt repayment.

We recommend choosing a method that suits your specific lifestyle and financial goals. GLOSS Vault can help you by providing all of your bank accounts and each place you spend money in one easy-to-use app!

Should I Monitor and Adjust My Budget Regularly?

Creating your budget is just the beginning. It is essential to regularly monitor and adjust your budget as your needs can easily change over weeks and months. Here are a few tips on how to stay on track:

Track Your Spending: Use an app or a spreadsheet to keep an eye on what you're actually spending compared to the amounts you have budgeted for.

Monthly Reviews: At the end of each month it’s important to review your budget to see if you stayed within your limits. If you are over budget make sure you’re flexible with changing your budget categories so you can ensure it’s not the same in a month's time.

Flexible Changes: As we all well know life can be unpredictable, and your budget needs to be flexible to account for that. If your income or expenses change, update your budget accordingly.

How Do I Stick To My Budget?

Sticking to a budget consistently does require real commitment. Here are some tips to help you stay on track:

Automatic Savings: You can set up automatic transfers to your savings accounts. This process can ensure you’re consistently saving without the extra effort of having to transfer your money consistently.

Turn Away From Impulse Purchases: Impulse purchases will always be tempting, especially a few treats because the trainers you have had saved for a while are now on sale. The best way to think about it is- would you buy the item at full price? If the answer is no, you don’t actually need it! Keeping consistent with your budget also means over time you will have future savings to be able to reward yourself for your successful budgeting.

Consistently Review: Regularly assess your spending habits and budget performance. Reflect on your financial goals and remind yourself of the benefits of adhering to your budget.

Summary

Creating and sticking to a budget might seem overwhelming to begin with, especially with how busy life can be but with careful planning and regular monitoring, it can become a really beneficial part of your life routine. It’s important to remember that budgeting is not about restricting yourself, it’s about making your money work for you and ensuring that you have the resources you need for a bright future!

Here at the GLOSS Vault, we have made it our mission to help as many people like you across Australia feel in control of your money and ensure you’re getting the most out of it. To find out more about us and what we do click here. If you’d like to see our app in action for yourself head here!