Lesson Three
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Lesson Three
A budget is not a once off decision. Once you start budgeting and being disciplined with your money, you will start to have confidence and reduce a lot of the stress around your finances. This means you will need to be committed and keep it up every single month for it to keep you on track.
Take a screenshot of your budget when it’s done and save it to your phone. This lets you review it any time you need, to see how much you have for certain expenses and confirm amounts before you start swiping that card.
It is always good to check your account statements and see what purchases you made. This ensures you did not stray from your budget, and if you do spend out of the allocations then it is best to think about adding in a new category for expenses or adjusting an existing one.
As you set up your budget each month, check back on the previous month to see how you did and if you kept within the allocations. This helps you make decisions on what expenses need to be adjusted and keeping it realistic.
A great way to track your spending each month is to separate the physical cash. The envelope system basically sets you up with envelopes to match all of the non-deductible items within your expenses list. You would then withdraw the amounts in full from your account and place the exact cash value in each envelope. This system requires you to then use cash to pay for all of the envelope items you have created, ensuring that you do not use more than what you have set as a limit. Once the cash in a specific envelope is finished, you cannot spend on that category until the next month.
This is a great way to stick to certain budgets for groceries, entertainment, and other lifestyle purchases.
This concept suits those who are too relaxed with their cards and tend to swipe without thinking where the money belongs. Try it out for one of the months and see if it works for you. The Digital alternative is to create multiple savings pockets within your banking profile (rename them first), then you can transfer the specific value to each savings pocket for the allocated items you need. It all comes down to discipline and being honest with yourself!
Once you have the budget in place and are sticking to your own limits, then you can start planning out the goals you have in life. You will have a great insight into how you are doing financially and will have trimmed off some of the unnecessary expenses. You can start allocating budget items to goals that you want to achieve such as retirement funds, holiday trips, large purchases and even saving up for a car or house.
You can set up savings accounts as a safety net for any unplanned expenses such as emergencies, investments in yourself or even a fun purchase that you have now worked hard for. It is your money, so you should decide where it should be spent – and you can finally start enjoying it!
Don’t be discouraged when it doesn’t work out some months, it happens to us all and is always a lesson learnt. Keep it up, stick to your rules and enjoy the financial freedom you have worked so hard for!
What do you need to put into the envelop system?
