Set a BUDGET in 5 steps!
Overspending these days is super easy! Before we would only be tempted at shopping malls, but these days e-commerce advertisements bombard us everywhere we go – be it on social media or even our apps! We know it’s hard to not spend, though, so we’ve put together some quick steps to setting up a shopping budget.
1. First, track your actual spending in a month.
To create a budget, you must already know how much you’re actually spending in a month. You can either go on a test drive and track each expense accurately, or you can create estimations based on your previous monthly expenses. You can either use an expense tracker app on a smartphone or even the simple pen and paper!
This is an important first step because it’ll help you put some expectations and markers for how much you should be spending on each category for each month.
2. Create a budget for each spending category and split into weeks.
Once you’ve already tracked your spending and have estimations for each category of spending, it’s time to look at your expenses as a whole and divide it into suitable amounts by category (such as clothing, food, groceries etc.). This will help you identify places where you can cut down on categories where you might be overspending, and help you plan your spending for the rest of the month – you’ll have to be disciplined, of course.
What can help you further is to split your monthly budget (once you’ve created everything) and split it into the weeks of the month. This will encourage further control of your spending and keep the cash in check, meaning less overspending.
3. Prioritize your spending
Take a piece of paper and write down your spending priorities each month. Prioritizing your spending will help you to have an idea as to where you should allocate more of your money to, while decreasing spending on things you don’t really care for. This will vary from person to person; you might place more priorities on hobbies because you’re still young and are living with your parents, for example.
It’s a great idea to also revisit your spending priorities monthly to readjust your spending capacities appropriately!
4. Have a spending buffer
Let’s face it: Not all of us are that disciplined to follow a budget strict to the last sen. There will be times where we’re going to think “ah, what the heck” and we’ll spend on that RM30 ice-cream frappucino-something-something (and go home to cry). However, it is still possible to budget for these types of impulsive spending without having to get a personal loan.
Just create a buffer! A spending buffer is that little bit of extra “stretch” in a budget – you can simply set aside a little extra for that month or week separate from your fixed budget. It is very very important that you are disciplined with this and not take advantage of it!
5. Stick to your budget and always reconsider a purchase
You’ve created your budget. It’s simple, straightforward, and looks perfect. The next thing you have to do is to be very disciplined and to ensure your expenditure stays within your budget. It’s easier said than done, but it must be done. One ‘ultimate’ tip to help you stay within the budget is to always reconsider a purchase, even if it falls within your budget.
Sure, that packet of drip-coffee looks good when doing your weekly sundry spending, but you’ve already got some instant coffee left in the glass jar that can last you another week or so. Do you really need that packet of drip-coffee now? Probably not.
This article was written by Lord Tan from Comparehero.my, a site dedicated to increasing financial literacy and helping you save time and money by comparing credit cards, personal loans, and broadband plans in Malaysia.