Co-author: Olivia Fairhurst
A survey by Perceptive Research reveals one in four New Zealand millennials and baby boomers believe they have “excellent” budgeting skills, whereas only one in 10 of Generation X say they are good at budgeting. This means 90% of 35 to 40 year olds aren’t so excellent at sticking to a budget. Why are we following through? After all, why go to the trouble of writing a budget – and then not sticking to it?
Dhilesh Vasan from financial literacy charity, SavY, believes those struggling with budgeting live beyond their means, according to this Stuff.co.nz article. Instead of choosing between that one concert and multiple cinema outings, Kiwis tend to do both, which isn’t going to save you any money long term. Many of us also feel uncomfortable when thinking too much about our long-term future finances, which includes learning how to do a budget, Mr Vasan believes.
How to budget: first things first
Obviously, the first key to sticking to a budget is to have one – and you can check out how to draw up a basic budget for yourself or your family here. But, once you have a budget planner, how can you make sure you stick to it? Here are some tips on how to budget your money.
It helps to track what you’re spending your money on, so you know where you are able to shave off some costs. It’s a great starting point for when you’re establishing how to budget so that you can stick to it. There are a number of ways you can track spending. For example, you can write down your spending in a notebook, use a money-tracking app, keep receipts and then add up expenses, or review your statements.
Budgeting advice site Sorted.org.nz also provides some more tips on how tracking your spending can help you budget.
How to budget your money the realistic way
Here are some tips on how to put your budget planner into action:
- The rewards method
Going all out can be hard, so why not make rewards a part of your budget? You could structure it so that every fortnight, if you’ve stuck to your budget, you can take a small amount and buy yourself something as a reward for your diligence; it could be a bottle of wine, a piece of clothing, a nice coffee, up to you. Just make sure that you’re not taking so much that it nullifies your savings.
2. Put your budget everywhere
Now that you’ve sussed how to do a budget, turn the “out of sight out of mind” sentiment on its head. The fridge, your room, your desk at work…Those are just three of the many places you can stick a copy of your budget. By placing copies around your home and workspace, you’ll constantly be reminded of your budget, which will reinforce your will to save. A single copy of your budget sitting in a drawer somewhere won’t do you much good.
- How to do a budget: being aware of bendability
The general idea behind how to do a budget is to be strict with your spending, but being overly strict, in some circumstances, can be more damaging to your budget then being extravagant. For example, if an unexpected cost comes up in the pay cycle, whether it’s a hospital visit, a broken household item needing replacement etc. you can afford to relax the margins on your budget a little to accommodate this expense. However, the flipside of this is that if you receive a bonus at work or some other unexpected windfall, a significant portion of that should be going straight into your savings
4. Make sure you’re on a low interest-rate credit card
The single easiest way to wreck your budget – and all the hard work you’ve put in – is overspending, and nothing makes that easier than a credit card. Canstar has some extra tips if you need assistance getting out of credit card debt. Why not swap in your credit card for a low interest rate credit card with a low – or no- yearly fee, where you can still get the benefits of building a credit history but without the cost. But, if you’re really struggling to stick to your budget, a debit card may be a better option for you. A debit card has many of the same functions as a credit card, but only allows you to spend your own money. It may seem tough but not having a credit card will not only help your budget, it’ll help your spending habits in general.
A budget is a test of willpower – but worth it
Discovering how to budget your money – in a way that you actually stick to it – can be a real test of your willpower. But, if you can manage to do it, you’ll love yourself all the more for it. Follow these tips and you should have no problem keeping your spending in check, putting you one step closer to your savings goal.
If you’ve got a savings target in mind, whether it’s a specific sum, or a holiday, or a car; keep these tips in mind. It’ll be harder to overspend when you think about the fact that you’ve just put yourself $50 further away from your goal.