8 February 2021
One of our key missions at SFP is to provide our clients with full reign over their financial journey. With that in mind, we are dedicating this month's blogs to exploring three areas that can be targeted to help regain financial control.
This week we will be examining the notorious budget. It has been called everything from dull to boring, but the benefits of a well-manicured monthly budget are too advantageous to be ignored. A budget allows us to see where money is coming from, how much there is, and where it goes each month.
A budget is often viewed as a restrictive device. However, it should only be restrictive in ways that are unaligned with our financial goals. In the short term, budgeting ensures that we aren’t spending money that we don’t have, and curbs our bad spending habits. In the long term, it helps us prepare for emergencies and leads to a happier relationship with our money.
Here are some fundamental principles to help you on your budget-building journey.
At its core, a budget only works if we are honest about our income and expenses. For a budget to be a useful financial tool, we must be willing to work with detailed and accurate information about both our earnings and our spending. To do this, we need to gather as much recent financial paperwork as possible (bank statements, credit card bills, receipts from the last three months, etcetera). The more information we have, the more accurate our average monthly calculations will be.
Set realistic expectations
Setting an unrealistic budget is setting yourself up for failure. Some people set targets that are too low based on their current lifestyle. If you feel that you are always out of budget, you will be discouraged from continuing the practice. Many of us underestimate how much we actually spend on certain luxuries. Convenience food is a big offender!
Don’t defund the fun
Having zero budget for entertainment purposes sets yourself up for that “I deserve a break” moment. Feeling deprived can lead to binge spending. It is better to have an allocated amount (however small) that you can stick to.
While you could use a pen and paper to draw up your budget, many modern (tech-savvy) approaches are both easier and more efficient in practice. There are numerous budgeting apps and spreadsheets available for download that have designated categories and built-in formulas.
If you are looking for advice or need help with budgeting, chat with us today.