People with a fixed amount of income may find sticking to the budget easier than those who are entrepreneurs, such as freelancers, sole traders, Ebay/Amazon sellers or anyone who doesn’t receive a fixed income.
The hard part is not just spending no money when we don’t have money, but also when we have too much money.
Entrepreneurs can earn much more than the average monthly income but in the next month or two, they may earn nothing, especially when the overall economy is not performing well due to whatever reasons, including the latest event: the lockdown restriction due to Covid.
Below are 10 tips on how to stick to your budget:
1. Prioritise Savings
When budgeting, use the Reverse Budgeting technique, where you save a certain amount of your income first before spending/budgeting the rest of the income. However, if you have debts, you should prioritise clearing out your debts first.
2. Know the Difference Between Wants and Needs
Sometimes it can get tricky to tell the difference between wants and needs. Here is a post about “How to Tell the Difference Between YOUR Wants and Needs”.
3. Know Your Goals
It’s hard to do something without knowing the goals. When it comes to budget, people often have financial goals, such as having emergency funds, retirement savings, etc. Therefore, don’t get tempted with slogans like “YOLO” (You Only Live Once) and then end up spending all your money carelessly. Or worse, not only spend but also borrow to spend and deal with the debts with heavy interests later.
4. Understand the Consequences
As mentioned above, some people with a YOLO mentality often end up borrowing money to spend on things they don’t really need and then dealing with the heavy interests on the debts.
5. Recognise Your Temptations
My temptations are always around technology. They can be new tablets, smartwatches, phones, and even small expenses like games and apps that are often wants rather than needs.
6. Always Track Your Expenses and Compare Them With the Budget
It’s easy to assume we are on track with our budget, especially when we think we only buy things we need (and not the things we want). This may lead to overspending unless we keep an eye on how much we spend and how much we budget for everything.
7. Budget for the Unexpected Incidents
Sometimes unexpected things happen: broken phones, speeding fines, emergency repairs, etc. Therefore, always set aside enough money to anticipate unexpected incidents. I would anticipate one broken phone and one speeding fine every year, and one emergency repair every 6 months.
8. Budget for Fun Activities
When we are too focused on our financial goals, we tend to overlook the ‘fun’ activities. Even though there are heaps of free activities out there, sometimes, due to the level of fun they offer, some events charge entry fees. With this in mind, it’s a wise idea to budget fun activities. But don’t go overboard. I would recommend limiting the paid activities to once or twice a month.
9. Have a No-Spend Challenge Week or Month
The no-spend challenge week or month does not just save money but also can help open our creativities. For example, drawing or musical activities that don’t require any money encourage us to explore our ability to create or modify bits and pieces artistically. Experimenting in the kitchen may lead to the creation of a new recipe. If you need some ideas how to have a no-spend challenge week or month, here are 20 No Spend Ideas for Indoor Entertainment at Home and 20 No Spend Ideas for Outdoor Entertainment.
10. Have a Gratitude Mentality
A gratitude mentality is simply a mentality that makes us aware of what we already have. This makes us feel content and lower our obsession with wanting more, especially things we don’t need.
Having a plan, as well as knowing what may happen if said plan is deviated from, will go a long way in making budgeting easier. There’s no such thing as being too mindful when it comes to saving money.