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How to Keep Your Personal Budget Under Control

How to Keep Your Personal Budget Under Control

Waking up one day and realizing that you don’t have that much money left to use this month is surely nothing nice. I’ve had it happen a couple of times and it wasn’t pretty. It’s not that I don’t have any common sense; the core of the problem sits somewhere else—bad money management.

personal budget

    So how was I able to fix it, and how you can do the same? There are some steps that need to be taken, but before I can tell you what I mean let me explain what this post isn’t about: it’s not about how to make more money, it’s not about saying no to the nice things in life, and it’s not about starving. It is, however, about being aware of where most of your money goes, and about being conscious of your spending habits.

    Monitoring is the first step

    I’m sure you’re familiar with the saying that what gets measured gets improved. This is a rule that’s valid for your personal budget as well. If you want to keep things under control, you need to start by paying close attention to what you’re spending money on. Now, this isn’t the moment where you should restrain yourself from buying something you’d normally buy. It’s just about writing down your expenses and keeping them for later analysis. Keeping note of very expense sounds like a lot of work, but the 21st century comes to rescue.

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    If you have an iPhone or an iPad (or an Android device) then you can use one of many personal financing apps that are available out there (image below).

    iPad-apps

      There are both free and paid solutions, such as:

      I didn’t have the chance to test them all out, so choosing the exact app you’re going to use is up to you. You can start by going to the App Store and searching for either “budget” or “personal finance”, but make sure that your app allows you to:

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      • categorize your expenses
      • add expenses on specific dates
      • add your salary and any income you have
      • input all costs using your local currency
      • change the currency (optional, if you’re spending money in more than one currency)

      One month head start

      Unfortunately, you won’t be able to do everything overnight: you need to spend some time getting data and building your spending profile, so to speak. Usually one month is enough to gather a sufficient amount of data, but if your spending habits are a bit more unpredictable then you might need more time. During this initial month, make sure to set a habit of noting down every expense you make by putting it into your chosen app. Remember to use the right categories, as this will be the only way you’re going to able to analyze this data later on.

      Let me say this again: categorization is key to success here.

      For instance, you can divide your expenses into these categories: rent, food, going out, coffee, alcohol, bills, gas, entertainment, education, etc. This is also a good opportunity to input your salary and any other profits you’re making (e.g.: freelancing, securities, bonds, stocks).

      Review

      When the month is over, it’s time to review your expenses and take notice of all possible areas for improvement. As I said before, the key here is to look at categories of your expenses: some of these categories are completely mandatory, like rent, or your electricity bill, so you can’t do anything about them. Others are not mandatory, but they are part of your “joy of life,” so to speak, so you wouldn’t necessarily want to get rid of them. The rest, however, may prod you into making some conscious decisions and taking a different direction with your money.

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      Start by looking at each category and deciding if you’re comfortable with the amount of money it costs you. If you’re not, then try to find cheaper alternatives or erase some expenses completely. For instance, one of the most interesting revelations for me was that I was spending an incredible amount of money on coffee. The first step I took was the decision to drink more coffee at home as opposed to going out—this one step cut my coffee expenses in half.

      This is just an example, but I’m sure you can see the potential that lies in this method. The more you categorize your expenses, the more areas of improvement you’ll be able to find. Again, this isn’t about lowering the quality of your life—it’s only about erasing stupid expenses and finding new and improved ways to experience as much joy in life and spending less money at the same time. Of course, if the amount of money you spend is more than the amount you earn, then you’re in a lot of trouble. Once you input your salary, every personal finance app will let you know about such a situation.

      When you have all your categories sorted, you can move to the next phase.

      Planning

      The final step is to plan your spending for the next month. Now, this isn’t about writing down what you can and cannot buy, but more about placing some simple guidelines in the back of your head. Things like: drink coffee at home, don’t buy more than three beers at a time, don’t use credit cards to buy cheap items, buy less clothing, and so on.

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      If you manage to pay attention to such guidelines for the duration of the next month, you’ll surely be able to lower some of your expenses with no loss in your quality of life. Actually, being aware of our personal budgets is not that difficult once we realize one thing: the devil is in the details, and when it comes to personal finance, details = small expenses.

      Subconsciously, we all know this. If we’re planning to buy something big—and I mean massively big like some Fort Worth real estate or a new car—then it doesn’t actually affect our monthly budgets. I mean, we always have everything carefully planned out, and know how much we can afford to spend exactly, and how much the investment is going to cost us over the years. However, buying something small here and there doesn’t seem like it can hurt us, but when we add everything at the end of the month, we can see that all those small things have turned into one surprisingly big bill.

      Personal finance apps help us to notice this and then take the right action… as long as we remember to put every expense into the app. I strongly encourage you to give it a shot and check how much money you can save. For me, the change has been significant, to say the least.

      What’s your take on this? Have you faced any surprising problems when dealing with your daily expenses?

       

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      Published on October 8, 2018

      13 Incredibly Useful Tactics to Help You to Stick to Your Family Budget

      13 Incredibly Useful Tactics to Help You to Stick to Your Family Budget

      Are you having trouble sticking to a family budget? You aren’t alone.

      Budgeting is difficult. Creating one is hard enough, but actually sticking to it is a whole other issue. Things come up. Desires and cravings happen. And the next thing you know, budgets break.

      So how can you stick to a family budget? Here are 13 tips to make it easier.

      1. Choose a major category each month to attack

      As the saying goes, “Rome wasn’t built in a day.” With that in mind, one approach to help you get into the habit of sticking to a budget is simply starting slow.

      Spend too much on Starbucks runs, eat out too often, and have an out-of-this-world grocery bill? Choose one bad habit and attack.

      By choosing one behavior to focus on, you’ll prevent yourself from being overwhelmed. You’ll also experience small victories, which help you gain positive momentum. This momentum can then carry over into your overall budget.

      2. Only make major purchases in the morning

      If you’re making large purchases in the evening, there’s a good chance you’re doing so after a long day and you’re probably tired.

      Why does this matter? Because our judgement tends to be off when tired – our willpower is compromised.

      Instead, only make major purchasing decisions in the morning when you’re energized and refreshed. Your brain will be firing on all cylinders and your resolve will be high. You’re less likely to give in and settle at this point.

      3. Don’t go to the grocery store hungry

      Have trouble with impulse buys at the grocery store? If so, there’s a good chance you’re going grocery shopping while hungry.

      The problem here is that when you’re hungry, everything looks good. So you’re more likely to make split decisions on things that aren’t on your grocery list.

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      Instead, make sure you eat prior to your grocery store trip. Then take your list, along with your full stomach, and go shopping. Notice how food doesn’t look quite so good when you’re not fighting cravings.

      4. Read one-star reviews for products

      Is there a product you just have to have (but maybe not really)? Check out the one-star reviews.

      By reading all the horrible reviews, you may be able to basically trick yourself into deciding that the product isn’t worth your time and money.

      Next thing you know, you didn’t make the purchase, you saved the money, and you feel good about the decision.

      5. Never buy anything you put in an online shopping cart until the next day

      If you are making a purchase online, it’s typically a two-step process. First, you click “Add to Cart” and then you go in to review your cart and pay.

      The problem is that there not typically much reviewing during step two. It’s generally click pay and there you go. However, this is the perfect point to stop for reflection.

      Once you add to your cart, your best bet is to step away until the next day. Let the item sit there and grow cold, so to speak.

      This gives you a night to “sleep on it” and decide if you really want and need to spend that money. If you wake up the next day and still find the purchase viable, then perhaps it’s time to go for it.

      6. Don’t save your credit card info on any site you shop on

      One of the other pitfalls of shopping online is that fact that most sites ask you to save your credit card information.

      While the sites will frame it as a method of convenience, the truth is they know you’ll spend more money in the long run if your credit card information is saved.

      The “convenience” takes away one last decision-making point in the purchasing process. True, it’s a pain to get out your credit card and enter the information every time. But guess what? That’s the point. If that inconvenience helps you stay on budget, then it’s worth it. Which leads into the next tip.

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      7. Tape an “impulse buy” reminder to your credit card

      Credit cards make spending much easier than cash. When you spend cash, you can literally see your wallet emptying. A credit card comes out, then goes back in. No harm, no foul.

      That’s why it’s a good idea to tape a reminder to your credit card. Customize a message that is something along the lines of “do you really need this?” or “does it fit the budget?”

      That way when you pull out the card, you get one last reminder to help you question your decision and stick to your budget.

      8. Only use gift cards to shop on Amazon

      Amazon is probably the easiest place online to blow money. It’s just so easy to click and buy. However, one way you can slow the process down is buy only using gift cards. Here’s how it works.

      If you plan on making a purchase on Amazon, go to the grocery store and purchase a pre-loaded Amazon gift card of the proper amount. There’s no convenience fee, so you literally pay for the money you’ll spend.

      Now take that gift card home and load it to your Amazon account. There’s your money to spend.

      Why does this help? It makes you have to purposely go to the score and purchase the card in order to purchase the item. That’s a pretty deliberate thing that takes some time, commitment, and thought.

      This process will effectively kill the impulse buy.

      9. Budget using cash and envelopes

      As mentioned earlier, it’s a lot harder to spend cash than swipe a credit card. You can take this even farther by using only cash, and separating that cash by budget category.

      Create an envelope for each category and stick the cash in there at the beginning of each month. When the envelope is empty, no more spending on that category, unless you borrow from another (be careful of that approach).

      This can be pretty helpful for people that have a hard time following transactions in their checking account, or keeping a budgeting spreadsheet.

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      The envelopes simplify the tracking process, leaving no room for error. Nothing hides from you because it’s tangible in the envelopes in front of you.

      10. Join a like-minded group

      Making the decision to stick to something like budgeting is difficult. It takes long-term commitment.

      You’re going to feel weak sometimes. And sometimes you may fail. That said, support from others can help strengthen resolve.

      Support can come from a spouse or a friend, but they won’t always have the exact same goal in mind. That’s why it’s a good idea to join a support group that’s likeminded.

      No need to pay here, as there are tons of free communities that fit the bill online.

      For example, reddit has multiple subreddits that deal with budgeting and frugal living. You can follow, subscribe, and get active in those communities.

      This will open your eyes to new tips and strategies, keep your goal fresh on your mind, and help you realize there are others dealing with the same struggles and being successful.

      11. Reward Yourself

      When you set a budget, it’s usually with a large goal in mind. Maybe you want to be debt free, or perhaps you want to see $10,000 in your savings account.

      Whatever the case, the end goal is great, but the end is often far away, making it hard to see the end of the tunnel.

      With that in mind, it’s a good idea to set mini-goals along the way. This helps you still look at the big picture but have something that’s attainable in the short-term to help with momentum.

      But don’t stop there – set rewards for yourself when you reach that small goal. Maybe it’s an extra meal out. Or a new pair of shoes.

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      Whatever the case, this gives you something in the near future to look forward to, which can help with the fatigue that can result in pursuing long-term goals.

      12. Take the Buddhist approach

      You don’t have to be a Buddhist to recognize some of the wisdom in the teachings. One of the tenets of the philosophy involves accepting that we can’t have everything we want. And that’s okay.

      Sometimes you won’t feel good. Sometimes you’ll have cravings. You can’t deny them. But you can recognize them, accept them, and let them pass by. Then you move on.

      Apply this to the times you want to do things that will break your budget. You’re going to have the desire to eat out when you shouldn’t. You might want to stay out and spend too much at happy hour with your work friends.

      The feelings will come. Recognize them, accept them, but let them go.

      13. Set up automatic drafts to savings

      If you wait until you’ve spent all your budgeted money to deposit money into savings, guess what? You probably aren’t going to put any money into savings.

      It’s too easy to see that as extra money and end up using it to treat yourself.

      Instead, set up automatic savings withdrawals. That way, the money is marked and gone before you can even think about it. It becomes a non-issue. It’s no longer “extra.” It’s just savings.

      Conclusion

      Sticking to a budget can be difficult. No one is denying that.

      However, if you can do a few things to set yourself up for success, and put some practices in place to curb impulse buys, then you can (and will!) be successful sticking to your family budget.

      Featured photo credit: rawpixel via unsplash.com

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