It’s always a great feeling when payday is here! However, frustration often kicks in at the end of the month when we find ourselves not being able to contribute to our savings.

Don’t worry – in this article we’ll introduce the importance of budgeting and how it can help you manage your financial situation better.

A budget acts as a guide to better understand the usage of your money. It allows you to make optimal use of your income and plan better. While the idea of changing your lifestyle doesn’t sound too attractive, using a budget planner actually helps you to balance your spending so that you’ll still be able to save at the end of the month. Let’s look at how this could work.

01

Define the Reason for Budgeting

Before setting your budget, it’s important to ask yourself why you’re doing this in the first place. What are your goals? Writing them down sets clearer financial goals, helps you better understand them, and keeps you motivated to build budgeting as a habit. Figuring out why you want to work with a budget will help you to stick to it. It triggers discipline and that is exactly what you need at this point.

We have listed out a few common reasons to start budgeting:

1. Want to earn more money
2. Want to save more
3. To break the paycheck-to-paycheck cycle
4. The desire to travel
5. To get out of debt
6. To buy something new
7. To stay on track with long-term financial goals

02

Track Your Current Spending Habits

Setting realistic budgeting goals is important. Understanding your current spending habits will help you to do just that. It gives you an idea on where your money is, and has been, going. Most financial experts would recommend tracking your spending for at least a month in order to get a clear spending pattern.

Here are a few tips on how you can do that:

Tracking manually

This is the most hands-on process. By keeping a consistent log of your expenses, you’ll be able to understand your spending habits better and identify your bigger outgoings. Whenever you make a purchase, write it down immediately or collect your receipts and enter them into an Excel sheet after.

Financial tracking apps

If you’re always on the go, financial tracking apps like Mint or Goodbudget, allow you to track your expenses anytime, anywhere.

Use your credit card/debit card

If you have a credit card/debit card, ditch the cash and start spending with your card instead. Your spending will be clearly documented in your statements and you will not miss out on a single detail.

03

Pick the Right Budgeting Method for You

Once you’ve defined what it means for you to budget and have a clear overview of your spending behaviour, we recommend you start with the popular 50/30/20 budgeting rule: where 50% of income is allocated towards your needs such as rent, food, monthly recurring bills, and debts. The other 30% is allocated for wants such as entertainment, traveling and celebrations. Finally, the remaining 20% goes towards your savings. You can play around with the numbers yourself if that works better or try out our savings calculator.

Tip: Automating savings is key to making this budget work, so you don’t ever short-change yourself.

You may also consider an alternative budgeting method:

Zero-Based Budgeting

If you prefer to micromanage your money, this is the ultimate budgeting method for you. This method gives you complete control and visibility over your finances. Zero-based budgeting is where the money you have in income matches exactly what is going out of your account. This doesn’t mean that you are literally spending all of your money. It means that you allocate every single dollar to a specific category, such as food, utilities, groceries, tuition fees, movies, savings, fixed deposit and more. With this method, if you were to save and spend exactly what was in each of your budgeted categories, every single dollar will be accounted for. However, it can be very time-consuming due to how much planning and tracking is involved.

If you’re working on a budget for the first time, take things step-by-step to make it a habit. Ultimately, there’s no one-solution-fits-all when it comes to budgeting. The continuous effort of tracking your expenses and finding a budgeting approach that works for you will help you achieve your financial goals in the long run. Happy budgeting!