Have you created your weekly or monthly budget but still find yourself running out of money? Do you find you’ve under-estimated how much you spend in certain categories, or had an unexpected expense crop up that has thrown off your whole budget?
While creating a budget is the first step on your journey to building financial wellbeing, it’s important to remember that your budget should always be fluid, and you should expect it to change and adapt it as your circumstances do, too. Here are 4 common budgeting issues that we all face, and how to tackle them.
1. Master the detail
Creating your budget is a great first step and whether it’s on paper, using an app or drawn up in a spreadsheet it’s important that you check in with it regularly. Schedule time to go over your budget on a weekly or monthly basis, and calculate whether your spending is in line with your budget.
Be as detailed as you can here, making sure you add up all the small expenses across the week. Once your spending is visible and you understand where you money is going, you can make an informed choice about where is realistic to cut back on.
2. Build up an emergency fund
Your emergency fund is your safety buffer against the unexpected expenses that life can throw at us, such as car repairs or technology replacements that add up and are often unforeseen. These one-off expenses can undo months of hard budgeting work if you don’t prepare for them.
By having an emergency fund ready to go, you will be able to cover these costs without having to worry about how to afford them. The size of everyone’s emergency fund will vary, and while experts recommend a rainy day fund of 3 – 6 months essential living expenses, this can be a lofty goal to achieve. Choose a number that you feel would give you peace of mind and is also achievable, and set a SMART goal to help you get there.
Top tip: if you have had to take money out of your emergency fund to cover an expense, prioritise building it back up again.
3. Align your budget with your personal goals
When you first begin your journey to financial wellbeing and start to think about the financial goals you would like to achieve, it’s important these match with your personal goals.
Perhaps you want to go travelling and so are saving for a trip, are looking to upgrade to a new car or thinking about the future and planning for your first home.
The steps you take to meet your goals should allow for life’s hiccups and accept that there are times of the year it is easier to put money away than others. If you know how much money you need to save for your goal and have a timeline in mind, try and build in some contingency for the things you can’t foresee, today. This might look like pushing out your timeline by a few months, or saving a higher amount each month just in case you miss a monthly contribution.
By factoring in the unexpected, your plan will have a much higher success rate.
4. Be honest with yourself
It’s not unusual for people who set out to establish their first budget to fail because they are in denial about some of their spending habits.
We all have a spending weakness, whether it’s online shopping, video game upgrades or a few too many treats while we’re out and about. Sometimes our habits are hard to admit, even to ourselves, and we might not realise how much of a dent they are putting in our budget because we don’t make the cost visible.
It’s crucial to look at where your money has really been going, to understand your budget goals and where you can look to cut back. The important thing is to acknowledge the weakness now, accept that you can’t change your past behaviour, and set a plan to be more intentional with where your money goes in the future.
What’s next?
Now you have some essential budgeting tips, use these hints next time you review your budget to see if there are any areas for improvement that will allow for you to reach your savings goals and build your financial wellbeing, now and in the future.
See our Student Money Guide for more information on budgeting.