Budgeting tips you may not have heard of
Written and accurate as at: Sep 15, 2022 Current Stats & Facts
For some people, budgeting is right up there with life’s least enjoyable endeavours. The idea of pouring over numbers to find areas to make cutbacks isn’t something to relish.
But budgeting doesn’t always have to involve sacrifice or number crunching. With a bit of imagination, it can even be fun. Here are a few budgeting tips you may not have heard of.
Invest in yourself first
The idea of putting yourself first when it comes to budgeting may seem a bit counterintuitive.
Surely all budgets are supposed to sting? On the contrary, a simple technique known as reverse budgeting is a refreshing approach that goes against the grain.
Traditional budgets begin with making sure that monthly expenses are covered first. After these are taken care of, you then look at what’s left for spending and saving. A reverse budget does the opposite. Placing high priority on putting yourself first, with this approach, you set your savings and/or investing goals first and put money aside for those. Once that’s taken care of, you figure out the rest of your budget with what you have left.
Doing this can have a double whammy effect—it can increase the chances of hitting your savings goals and force you to become savvier with your monthly expenses because you only have a certain amount of money leftover to make them work.
Identifying spending behaviour you want to change
As humans, we tend to have a set amount of willpower*, and if overused, that willpower can be depleted. Reflecting on the one area of your spending that represents your biggest weakness can go a long way to helping improve your monthly finances.
For example, maybe you know that you overspend on eating out. Or, perhaps you overspend on gifts, or, you are unable to say no to your son or daughter if they ask you for money. Once you’ve identified the area of weakness in your spending, you can consciously focus your willpower in that direction and decide whether you want to take a different approach.
Going back to basics with a brown envelope
Research has shown that we tend to spend more when we take a debit or credit card out for a shopping trip#. The convenience of tap-and-go technology can often compound this effect.
In contrast to this, because cash is tangible, chances are, we are more likely to value the paper we are holding in our hands and more aware of it leaving our possession. The brown envelope idea can come in especially handy at the supermarket, where the major retailers use tactics to entice us to spend more money.
Next time you head to the supermarket, set yourself a spending goal and consider taking cash instead of plastic. You might find that having a finite amount of money to spend forces you to be more mindful about what goes into your basket.
Think percentages instead of dollars
Most budgets are focused on dollar values—how much money do I need to cover bills? How much should I save each month? How much money can I spend? While these questions are all important and valid, thinking about your budget in terms of percentages rather than dollars can help to keep your savings and spending going in the right direction.
An example of using percentages as the foundation of your budget can be the 50/30/20 budgeting rule. The benefit of this kind of approach is two-fold. Firstly, it may force you to reflect on how you want to spend your money before you start crunching numbers. This can help to ensure your spending and saving balance is a healthy one. Secondly, focusing on percentages and not dollars provides a budgeting guide that you might find easier to maintain or adjust as your income and needs change over time.
Often the key to this approach is making sure that the percentages you use to divide up your income make sense for you and your long-term financial goals.
Finding a budgeting method that works for you might require some trial and error, but thinking outside the box can hopefully help the process along and make things more fun at the same time.
If you would like to talk to us about anything in this article, please get in touch.
Sources:
* https://www.apa.org/topics/personality/willpower-goals
# https://psycnet.apa.org/record/2008-12802-002