Effective and Stress-free Budgeting—make your impossible purchases possible

Money and budgets can cause an increase in stress, especially when funds are low and money is tight. Effective budgeting, however, is a healthy habit, brings stability to a person’s life and can also be stress-free with the following seven tips.

1) Understand why you are budgeting

Budgeting without purpose is a waste of time. There are several important reasons to budget, but keep in mind that everybody’s financial circumstances are different. Some may budget to make sure they can pay all of their bills. Others budget to make sure they have extra money to fund retirement or pay down debt. The key is to identify why you are budgeting.

2) Budgets alone are useless . . . you must execute

How many times have you set up a budget in Excel or your favourite budgeting tool and then completely forgotten about it? Many times, setting up the budget makes us feel like we are doing the right thing, but it doesn’t have any meaningful effect on how we spend our money. Budgets alone are useless; we need to execute on the plan.

3) Pay Yourself First

A very effective budgeting strategy is to set aside savings as soon as you get paid. By doing so, you avoid the temptation to spend that money later in the month. You also aren’t fooled into thinking you have more money available to spend than you really do.

4) Budget Monthly for Periodic Expenses

There are a lot of expenses in most budgets that aren’t monthly. Like car insurance there’s life insurance, vacations, gifts, taxes. The way to handle periodic expenses becomes simple.

5) Expect the Unexpected (Emergency Fund)

There are some expenses you know are coming, but you don’t know when or how much. Home and car repairs are a perfect example. By estimating it we can come to know how much to set aside each month. And even if you come up short, at least you’ll have some of the cash you’ll need to handle these unexpected costs.

6) Budget for Big Items

By setting aside just a little bit of money each month, you will enable you to pay cash when you want to buy expensive big items. With a little planning it’s possible. Try the 3-
7) Category Budget
Many people avoid budgets for one reason–the thought of tracking every dime they spend is just unbearable. If that’s you there is a simple solution–don’t. For many, there is no need to track every category of spending. Remember to think back on why you are budgeting in the first place. If it’s to control your spending, figure out what spending areas cause you the most trouble. If you are like most, you can probably narrow it down to 3 categories or fewer. Then just track those categories of spending.

Spending less than we make is often cited as the most important personal finance goal. It helps us get out of debt, save for emergencies, and stash money away for retirement. It’s the primary habit that enables us to achieve some level of financial freedom.

Important links –

  1. https://www.mymoneycoach.ca/budgeting/what-is-a-budget-planning-forecasting
  2. https://www.neamb.com/personal-finance/6-simple-steps-to-build-a-stressfree-budget
  3. https://www.thebalance.com/dealing-with-financial-stress-2385957
  4. https://www.forbes.com/sites/robertberger/2015/07/26/7-tips-for-effective-and-stress-free-budgeting/?sh=7ae990b42687

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