The pandemic has redefined the normal for us. It has left a devastating impact on the global economy. Statistics suggest that inflation is at a 40-year high. In such challenging financial times, one must make smart financial decisions to stay afloat. Budgeting and saving money are some of them.
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The word budgeting gets a bad rep as it is considered a plan to be frugal and unrealistic. It is far from the truth. Budgeting means creating a plan for spending your money. It can help you save money. Here is all you need to know about budgeting.
How Budgeting Can Help Save Money
Creating a plan to spend your money will help you take control of your finances. By understanding how you spend your money, you will be able to identify ways you are wasting your money. A budget provides an overview of your expenses, how much you need to earn to meet your needs, and what you can do to save money.
In such high-inflation times, budgeting has become a necessity. If you do not make a budget, you will not be able to have a sound idea of where your money went at the end of each month. A budget can help prioritize tasks and identify frivolous spending that helps you spend smarter.
Calculating Your Income and Spending
Instead of focusing on your total salary, calculate your net income. Your income is your earnings with taxes and incentives subtracted. It provides an estimate of how much money you have to spend. By focusing on your net income instead of your total salary, you can prevent overspending.
The first step of creating a budget is calculating your expenses. List down every way you consistently spend money. This list should include everything from basic utilities to entertainment. You can maintain a journal or simply make a note every time you make a purchase.
Setting Practical Goals
People are unable to save money from budgeting because they set unrealistic goals. It is important to have a practical approach when creating a budgeting plan. If you set a goal that is impractical and unachievable, and you end up not making it you will feel disheartened and disappointed. This will derail your finances instead of helping you take control of them.
Making a Plan
Set your financial goals and bifurcate them into small-term and long-term goals. Short-term financial goals can include home repairs, paying credit card debt, and travel savings. These should take you anywhere from a year to three years to achieve.
Whereas, long-term financial goals are what you take decades. These include a retirement fund, paying for your child’s college, and paying off the home mortgage. It is crucial to remember that these goals are not etched in stone. However, setting goals can help you save money for these goals.
Being Okay with Fluctuations
Do not stress yourself out about deviating from the plan a bit. If you have not saved as much as you did last month, it is okay. It is imperative to realize that not every month will be the same. There will be unforeseen expenses or situations that might set you back. However, the key is to not be disappointed and have room in your budgeting plans for such fluctuations.
Use Cash for Groceries
At times, it can be difficult to stick to a budget when you are using a card. If you make a list of the groceries you need and carry the money to buy them, you will not be able to spend on additional items. It will help prevent overspending on your monthly grocery runs.
Sticking to a budget and saving money is the requirement of the current times. With such high inflation and reduced buying power, making smart financial decisions is necessary. If you are new to budgeting and want to save money from a budget plan, follow the aforementioned tips.