Have you ever looked at your checking account and been stunned by the amount of money left? You thought to yourself, “Where has my money gone to?” It’s not stolen but rather spent nonchalantly without proper budgeting or financial planning. Budgeting is the process of laying out your income and expenses to stay within your means. Why is it important to have a budget? Find out the answer below, and let’s learn how to create a no-shame budget here!
Why is it important to have a budget?
It’s easy to forget all the small details. You may not even remember what you had for breakfast this morning. The point is, managing your finances requires you to always keep track of every transaction—no matter how small it is. Let’s not think of it as a cage holding you back to buy what your heart desires. Instead, see it as your diary that helps you see the bigger picture moneywise.
There are many benefits of budgeting. The first and most important one is to help you reach your financial goal. But how, though? After all, budgeting is just a record full of numbers and dates. It’s actually quite simple. As you write down all your incomes and expenses daily, you get to see where your money goes. Perhaps you realize that you’ve been spending too much money on takeouts—an expense that you can curb easily by cooking at home.
In the end, you can learn how to put your money in different baskets and save more. If you want to buy a house or save up for a beach getaway, budgeting will keep you motivated to say no and walk away whenever you see that end-of-season sale.
How to start budgeting
So we’ve answered the question “why is it important to have a budget”. The next step is how to start one. Should you prepare an Excel spreadsheet to do this? It’s up to you; you may even use a journal or book. However, you need several strategies to help you stay committed to budgeting. Here are several budgeting tips to get you started.
-
The 50/30/20 budgeting method
It’s a guiding principle, not a rule that you must follow blindly. The 50/30/20 method is a strategy that many people swear by. It advises you to spend your after-tax income in several portions. Set aside 50% of it for all your necessities, such as rent, debts, electricity and internet, food, and transportation. Then, 30% of your income is dedicated to entertainment and less important stuff, like streaming subscriptions, morning coffees, vacations, and gadgets. The remaining 20% is for savings and investments.
As stated before, you may customize this budgeting method if you feel that it doesn’t suit your lifestyle. For example, you have more necessities rather than wants. In that case, you may change it to 60/20/20.
-
Electronic wallets or e-wallets
Some people argue that e-wallets cause people to spend more than they should. This is only half true because e-wallets can help you budget like a pro when appropriately used. For instance, the app has a history tab where you can see all your past transactions. It’s also easy to restrict your expenses via e-wallets. Simply top-up a certain amount once per month. What’s even better is that most e-wallet providers have cashback promos that can help minimize your expenses.
-
Use budget planning tools
There are many apps available with various features. Mint, for example, is a highly-rated budgeting app that can be synced to your checking and savings account. This allows you to automatically track incomes and expenses, making it very beginner-friendly. Honeydue has a feature that can alert you for upcoming bills and set up monthly budget limits for each expense category for those who want to manage their household finances with a partner.
All in all, your financial future is the core reason why budget control is important. A budget helps create financial stability, something that everybody should have. Still the question remains, why is it important to practice budgeting? The bottom line is having a budget puts you on a firmer financial footing for both the day-to-day finances and in your long term goals.
Plan to diversify your investment portfolio? Click here to start your investment with Funding Societies Malaysia.
Need funds for your business? Click here to learn more about Funding Societies business financing solutions.
View our Disclaimer here.
Disclaimer: The information provided to you in this blog post is intended only for general information purposes only and does not constitute legal or other professional advice on any subject matter. The materials and the information provided are not intended to be and do not constitute an advertisement or solicitation. In no event will Funding Societies be liable to any party for any direct, indirect, incidental, special, consequential or punitive damages for use of such information by you or any unauthorized third party.