Back to basics: Budget
Budgeting is a word that’s thrown around a lot, and if you use it, it can help you manage your money, pay off debt sooner and save more, empowering you to take control of your finances and plan for your future, but to effectively budget, you need to understand what it means and how to do it.
What is budgeting?
A budget is a plan that outlines how to spend your money based on your income and expenses. This process helps organise your finances: how much you have, what you need to prioritise your spending (and saving) on, and how to manage your expenses. Having a clear view of your complete financial situation means you can better allocate your money to reach your goals and enjoy life.
How does it work?
Building a budget and sticking to it is equally important, whether you have lots of money or are in debt. It starts with tracking your expenses and how the total amount compares to your income. The goal is to have more coming in than going out. You can do this the old-school way by writing it down, putting it in a spreadsheet or using the Money Movements feature on the Banking App.
From here, your budget will guide how you spend your money. Is there perhaps something you can cut back on or better use for your money? Perhaps you’ve got more than you think you have?
Of course, it’s only helpful if you use it. Following it doesn’t mean being restricted; it’s about identifying the gaps and making the most of your money so that you can start saving more or paying off your debt.
Why does it matter?
Budgeting is important because if you spend more than you earn, you’ll always struggle with money. A budget helps you get a handle on your finances and gives you actionable steps to improve how you spend your money and keep you from overspending.
The bottom line
Budgeting isn’t a complicated process that takes the fun out of life. It’s a way for you to take control of your finances and enjoy the freedom that your hard-earned money can provide. If you want to control your spending and reach your goals, it helps to have a plan in place.