2021 is here and along with every new year comes brand new resolutions!
While you’re probably thinking of picking up a brand new hobby or travelling to a new country once it’s safe, have you made goals for your expenses and budget?
If not, now is the perfect time to do so.
For those who have no clue where to start, here are 6 tips on how to budget your expenses to reach your personal financial goals!
Tip 1: Set Your Financial Goals
The very first step is to determine what your actual financial goals are. Are you looking to save up for a new car? Maybe you want to save up a downpayment for that condo unit?
When you finally have a goal in mind, that’s when you can begin to formulate a plan on how you intend to achieve it. These personal targets could be to get out of debt, pay off your student loan in the next few years, build an emergency, save for retirement—the list goes on.
When coming up with these goals, it’s important to not go overboard and set quantifiable financial milestones. This means that instead of setting an unrealistic goal for yourself, break it down and think of how you can attain this step by step.
Here’s a helpful resource to get you started on setting those financial goals!
Tip 2: Calculate Your Monthly Income
Now that you’ve gotten your goals in check, take the time to note your net income.
If your income comes in the form of a regular monthly paycheck, then using the net income amount is perfectly acceptable.
Once you have determined your baseline income, subtract your fixed expenses like taxes, utility bills, rental payments, and insurance. What you are left with will be the amount to work on when creating a budget plan for yourself.
Tip 3: Track Your Spending And Start Budgeting
When creating your budget sheet, it can be helpful to categorise your spending into two different groups—your needs and wants.
Your needs would typically consist of your fixed expenses, while your wants are the unnecessary but desirable items. Having a budget sheet and tracking your monthly expenditure will help ensure that you meet your financial goals and don’t spend money that you don’t have.
While this may seem excessive, it is crucial to manage and track all your expenses down to the last cent. Doing so will allow you to identify what you are spending the most money on and which areas you can cut back.
Tip 4: Start Saving!
As you spend money, ensure that you are also saving at the same time. By starting early, you will be well on your way to financial security and freedom, bringing you one step closer to your goals.
To begin with, make sure you have a savings account where you can store your funds. If you want to take it a step further, you might want to consider having multiple savings accounts for various financial goals.
On top of your personal goals, set aside some money for an emergency fund that can cover you in the event of an unexpected financial blow. This will give you peace of mind and prevent you from going into debt as well.
Tip 5: Get Out Of Debt
One is never truly financially stable until they are out of debt completely. If you have outstanding debts such as student tuition loans, you have to know that their interest rates will just keep increasing over time. Unless you really know what you are doing, aim to pay off any outstanding loans as fast as possible.
By focusing on getting out of debt fast, you’ll be able to reduce the amount of money you pay in interest and put that towards something more useful such as an investment portfolio or a business fund.
Keep in mind that debt repayment should fall under fixed expenses and not variable expenses.
Tip 6: Make adjustments to your expenses or spending habits
If you are spending way above your means, you may need to take a step back to re-evaluate spending habits and make certain lifestyle changes. Look for areas in your variable expenses where you can cut down on.
How often do you eat out in a month? How much money do you spend on coffee in a week? While it is understandable to spend your well-earned money, we have to practice discipline!
If you really want to achieve those financial goals that you have set for yourself, it’s important to save and make the necessary changes in order to get there. Think of it this way: would you rather have a $500 wallet with just $30 in it, or own a $30 wallet with $500 in it?
More Savings. No Compromises.
Saving money and attaining your financial goals for this brand new year doesn’t have to be difficult. Most people think that there are very few ways to cut down on expenses, especially if they’re fixed costs such as rent, internet, and energy bills.
But with iSwitch, you can enjoy guaranteed savings on your electric bill while enjoying the same, reliable electricity supply.
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