A lot of people write out a budget, but just like a diet, not many stick to it. The reason that a lot of us find both budgets and diets hard to follow perhaps comes back to feeling restricted and like all the fun has been taken away. However, there are changes you can make to ease the pain of the budgeting process.
Here are 5 simple ways you can revamp your budget, and stick to your plan this time around:
1. Make it MORE realistic
The fact of the matter is, no matter how much you can save on paper by eliminating social expenses or entertainment, if you like to go out and enjoy yourself on weekends, you need to account for this in your budget.
A budget is only worthwhile if it works in reality. Before you re-start your budget, do a test week or two and see how much you spend on entertainment. By all means, reduce your social spending, but if you tell yourself you’ll cut back drastically or all together, you may have failed before you even begun.
Just like any good diet, (which allows for a small treat here and there), a good budget will account for your small indulgences in life. Whether your weakness is for good wine, shoes, spa treatments or even just a latte on your way to work – you need to recognise this as something you do, and then determine a reasonable percentage for its place in your budget.
Keeping in mind the point of this exercise, it’s likely you’ll want to cut back in this area. However, the idea is that by allowing yourself the nice bottle of red or a massage every now and again, you will feel less restricted, and more able to stick to your financial plan.
3. Life doesn’t always go as planned
Your spending in October is going to differ from September, which will have been different to August. Some months you’ll have three birthday presents to buy, and the next month you might need to pay for emergency car repairs. A budget that doesn’t plan for life’s irregularities is not going to work.
In order to account for these expenses, setting aside a small sum each month to cover unexpected costs is one way to ensure you’re not caught by surprise. Additionally, by accounting for unexpected expenses, you’re less likely to be rattled and derailed when these costs come your way.
4. One size doesn’t fit all
Budgets can come in many forms, and it’s for this reason you may have to try a few different budgeting styles before you find a system that works for you. Some advisors will tell you to keep your receipts and stick to defined amounts for each category. Others will advocate the ‘essential’ and ‘non-essential’ approach, with a limit on spending for both.
Even if you want to withdraw a set amount of money per month and keep it under the mattress - that’s up to you! It may take some experimenting before you find an approach that works.
The bottom line is to fess up to your habits, and be open to trying a few different budgeting systems before settling on the one that you find works best.
If you cancelled the Foxtel and changed mobile plans 6 months ago, why is it still on your budget? Our lifestyle and financial circumstances are constantly changing, so you will need to keep updating your budget to reflect these changes. As soon as you can, if your circumstances change, be sure to revisit your financial plan. After all, you may find you have a little extra to throw at your ‘luxury’ spending!
The more accurate your budget is, the better you'll be able to stick to it, and the more successful you will be at improving your financial position.
As with many positive changes, budgeting is sometimes painful, but it is worth it in the end. Think of your budget as a permanent lifestyle change, and you'll find a realistic plan that can work with your life, instead of against it.
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now