Building a new home for you and your family requires a lot of discipline especially when it comes to finances. Taking the time to manage your money better can really pay off. It can help you stay on top of your obligations and even save thousands of dollars each year.
However, if you still consider yourself a beginner when it comes to managing your finances, you need are going to need help. Here are some pro tips on how to manage your budget well so that you won’t have to waste your hard-earned money.
What’s the Point of Budgeting?
Before everything else, what is the point of having a budget anyway?
A budget done correctly is the most precise tool for analyzing your finances imaginable. It answers two key questions: first, do I spend more than I earn? The second is what can I afford to spend?
An instinctive assessment is easy – if you’re eating up your savings or building up debts, you’re likely to be overspending. Before you can solve any financial hurdle, it is important to get an accurate idea of the size and scale of the problem.
As Charles Dickens said in Mr. Micawber, “Annual income twenty pounds, annual expenditure nineteen six, result – happiness. Annual income twenty pounds, annual expenditure twenty pounds six, result – misery.” Major overspending can lead to a debt spiral and severe problems.
This is why the Budget Planners are all designed to definitively answer this problem and give you a real assessment of your finances.
Once you know where you’re spending, you can start to alter and prioritize what you do with your money to enable you to stick within your means. While the budget planners include tools to enable you to work out how to prioritize within your means, the real difficulty is sticking to it.
How to set up a budget
The first step into proper money management is setting-up a budget. It will take a little effort, but it’s a great way to get a quick snapshot of the money you have coming in and going out.
Setting up a budget means that you will less likely end up in debt and less likely to get caught up by unexpected costs. You want yourself to be inclined to have a good credit rating and be more likely to be accepted for a mortgage or a loan. With all of these, you want to be able to spot areas where you can save, so that you will be in a great position to save up for other funds allotment like a holiday getaway, a new car, or another fine dining treat for you and your family.
To get started on your budget, you’ll need to work out how much you spend on household bills, living costs, financial products, family and friends, travel, leisure, and other essential stuff. List all of them. At this point, it is best for you to take advantage of technological advancements right now and use applications that can help you with your planning.
You can keep track of your finances by using accounting software. If you want a professional accounting approach to your budget management, you go for bookkeeping software like that of Xero Software. This kind of software allows you to use ledgers, books, and other tools of bookkeeping to keep track of your finances. You can also use pre-made applications such as Budget Planner that focuses most especially on allowing you to set-up your budget.
Getting your budget back on track
If you’re spending more than you have coming in, you need to work out where you can cut back. This could be as easy as making your lunch at home, or cancelling a gym membership you don’t use.
You could also keep a spending diary and keep a note of everything you or your family buys in a month. If you do most of your spending with a bank card, have a look at last month’s bank statement and work out where your money is going.
It is also important to get your whole family involved because it is of outmost importance that all of you work together to follow the projected budget. Sit down together and make a plan that you can all stick to. Work out how much spending money is available and agree between you what you’ll each have.
Setting a savings goal
Some people find it hard to get motivated about saving, but it’s often much easier if you set a goal. Your critical move is to have some emergency savings – money to fall back on if you have an emergency, such as a boiler breakdown or if you can’t work for a while.
Try to get three months’ worth of expenses in an easy or instant access account. Don’t worry if you can’t save this straight away, but keep it as a target to aim for. The best way to save money is to pay some money into a savings account every month.
Once you’ve set aside your emergency fund, it would now be the best time put your focus on savings for your main goal of getting your new home. You might be tempted to take that holiday or get that car you have always wanted. You might get easily distracted at this point. This is why your goal should always be checked and reinforced on you. This is the best time to put your energy in keeping your eyes on the prize.
Applications that can help
Aside from the ones mentioned above, here are other applications that can help keep track of your finances and investments.
One of the most comprehensive apps for tracking all of your financial activities, Personal Capital makes it easy to monitor and track your net worth. You can link multiple investment accounts separately and have easy access to your portfolio performance and investment allocations on your mobile device or desktop. You can also make use of the Investment Checkup tool, which will map out your target allocation and make recommendations. If you like to be very hands-on with your portfolio management activities, this may be the best tracking tool for you.
Senthil Kumar, vice president of marketing at Oracle Financial Services, says that “digital technologies have transformed the way people can track investments.” Kumar calls out Ellevest, one of the newest players in the financial-tech industry designed for women interested in investing, as an example of online platforms changing the way people are managing their money.
Ellevest provides a personalized portfolio based on your age and zip code, gives you the option to customize your plan based on your goals and allows you to fund your plan and set up contributions online – all the things a financial adviser would do. You can get access to tracking tools and get updates and alerts if you start falling short of your goals. If you don’t like the idea of setting up face-to-face meetings with a financial adviser, the tools available through Ellevest could make it easier to track your investments and also learn about investing in the process.
If you like to review graphs and reports on your own rather than relying solely on recommendations or suggestions from a software program, try Ticker to see detailed, real-time data about the value of your accounts, profits and losses and other important details. You can set up push notification alerts based on different “triggers,” including price changes, volume changes and certain percentage thresholds based on your goals. The app also makes it easy to review the real-time market value of your accounts in a few screen swipes. Use the app to compare portfolio performance metrics side by side.