- Personal Finance
Simple Tips to Budget for Financial Freedom
Whether you are earning thousands or hundreds of thousands of ringgit a year, it is always wise to keep track of how much money you have spent and where you have spent it. A budget is the most fundamental and effective financial management tool to help control your expenditure. Having a budget is a key factor that separates those who realize their financial dreams of becoming wealthy and those who only dream of becoming rich.
Nevertheless, for a budget to work, you need to be optimistic and not view it as a chore. Your personal attitude towards budgeting will determine how successful your financial management will be. In truth, individuals who do not believe in budgeting are the same people who usually overspend. If you happen to be one of these individuals, you’d better arrest this mindset if you want to be in control of your money.
Create a Budget with Realistic Targets
It is sometimes better to start off small than to take big steps that could possibly end up in failure. For instance, avoid pledging to reduce your entertainment spending by 80% within a month or two. Instead, aim to lower it gradually and make adjustment if necessary.
Budget for Expenses That Are Not Routine
Most of us incur expenses that are not routine such as birthday presents, Christmas presents, car maintenance costs, vacations etc. It is imperative that you record these events on a calendar and plan in advance how you will pay for them. Large expenditures can become small as long as you set aside money for them regularly each month.
Put Your Budget in Writing
Take time to write down your budget plans. Making a mental note of your budget goals is a recipe for failure. The goal here is not forget about your budget. Pin up your basic budget goals on the refrigerator – this will serve as a reminder to stick to your budget.
Review and Adjust Your Budget
There may be times when your will need to review your budget due to new and finishing commitments. Review your income and expenditure at the beginning of every month. Compare the budget and actual spending, then make necessary adjustment to your spending habits.
Set Specific Short-term Goals
Let’s say one of your budgeting goals is to have all you credit card bills paid off within two years. If your credit card balances total to RM20,000, you can break it down to RM10,000 a year and divide the payments into RM2,500 every three months. This will make your budget easier to achieve which can motivate your to keep the budget going.
Remember to Pay Yourself First
One of your key budgeting goals would be to save and invest a portion of your income. Upon receiving your paycheck, move the money immediately into a savings account or invest it into a unit trust fund. Many unit trust companies provide an option to automatically make deductions from your paycheck each month.
Don’t Give Up
When things do not go accordingly in your budget, do not panic or give up. Just go back to your plans, identify and solve the problems and start over again. It certainly helps if you have friends or family members to provide encouragement as well as point you in the right direction if you make mistakes in your budgeting.
Attitude is Key
Your budget should not make you feel restrictions and pain. If your budget is too restrictive on your spending, chances are it won’t work. List down the spending and prioritise them accordingly. Be strong to stick to the plan to spend within your means. Stay true to the financial goals you set, you will reap the reward in the future. Over time, you will kick the habit of making a spur-of-the-moment purchase. Now, I know I am totally in control of my budget whenever I overcome the thought of an impulse purchase.