Setting and keeping a budget is the first step to taking control of your personal finances. It is a monthly, weekly or daily plan that details where your money came from, and where your money will be spent.
The most common mistake people make when they budget is setting the budget retrospectively only. This means they look at their account balance at the end of the month and see they've spent $1000 on groceries, $500 on gifts, and $300 on transport without any planning behind it. While knowing exactly where your money went is a very important part of budgeting, the example above missing a very important step!
A budget is a plan. We plan for the future, not for past events. A more effective method is to allocate how much you are spending for each category at the start of the period. Going back to our example above, you might have planned to spend $1200 on groceries, $200 on gifts and $300 on transport. Then at the end of the month, when you look back, you'll know you have an extra $200 to spend from the grocery budget, $300 over-budget for gifts and right on the money with transport. Looking at the difference between planned spend vs actual spend, you actually spent $100 more than you wanted!
As seen from the example, it can be very easy to overspend without realising. Meeting financial goals becomes harder and harder without a budget to give your money direction. Moneymgmt makes tracking your actual spend against your budget super easy!
After you've connected a bank account to the cashflow section of your Moneymgmt portal, you can filter income and expenses by budget and set the maximum amount you want to spend for each category. As each cash inflow and outflow is reflected into the Moneymgmt portal through the live bank feeds, you can then see how close you are to reaching your budget and exercise a little bit of self-control!
If you are looking to spend more on gifts this month, then perhaps you can spend less in the supermarket to balance your overall expenses within budget. Easy! It is a great habit to create now, for a life-time of benefits in the future. Smash through your financial goals with the budgeting tool in Moneymgmt!
Sign up to Moneymgmt here!