In recent posts i’ve discussed the benefits setting yourself a budget can bring as well as going into quite a bit of detail about how to set yourself a budget. Following on from these posts I’ve put together a list of some budgeting tips that may help you successfully set and manage your personal finance budget.

Budget with Your iPhone

Keeping track of all of your expenditure is not always as easy as it sounds. It is very easy to forget all of the purchases you have made throughout a day if your memory is anything like mine! To help me keep track of my expenditure I have recently started using a handy little app called iExpenseit on my iPhone that is perfect for tracking all of my expenditure.

After i have bought something I simply pull out my iPhone (which i virtually always have on me) and add the details into iExpenseit. As well as being able to categorize expenditure in several different ways, the best feature for me is being able to export the expense details into reports in csv/xls form that can be emailed to my pc. This means I don’t have to spend time punching them into my Excel budget sheet.

Consistency is King

As boring as it may be the main thing that will help you successfully manage your finances better through is to take a consistent approach. Trying to everything all at once will most likely end up with the same result as doing nothing at all – failure.

If time is short aim to set aside 10 or 15 minutes everyday to work on your budget. If you are struggling to trim your spending take it one small step at a time. Work on one thing at a time (such as making coffee at home instead of buying at starbucks, saving a few bucks a day) and make it habit before you move on to the next thing in your budget.

Plan for contingencies

Whenever you put together a budget you should always build in some sort of slack to help cover unforeseen events such as an unexpected car repair bill. The best way to do this is to budget a fixed amount each month to come out of your expenditure and put it into a savings account to keep it safe. I call this my ‘emergency fund’.

Be strict with yourself and don’ be tempted to dip into this pot and spend it. Remember this money is there to cover unexpected or unforeseen bills, not to blow on a new pair of shoes or a holiday!!

Don’t forget quarterly annual expenses

While we are talking about budgeting for contingencies do not forget that many of you households expenses will be only incurred quarterly or evenly annually. When you work out your monthly spend/budget you should apportion these expenses on a monthly basis. Doing so will mean you do not blow your monthly budget next month when the car insurance is up for renewal.

Don’t do it alone

I’ve read quite a few different books about motivation and motivational techniques. One piece of advice I have often heard repeated is to share your goals. The theory goes that if you tell other people about your goals and aims you are far more likely to stay motivated and less likely to quit or under achieve.

The reason this tends to work is that we like other people to be impressed by our efforts. After we have shared our plans we have an inbuilt fear of failure that arises from not wanting other people to think we have failed. SO go out there and tell a close friend or family member what you are doing with your personal finances.

You will often hear financial experts desperately telling anyone who will listen that one of the most effective ways to manage and control your finances is to set yourself a financial budget. In my last post I explained step by step how to make a budget. But why should we bother?

In this post I will set out some of the key reasons why setting a budget can (and hopefully will) help you shore up your personal finances and help you achieve your financial goals.

Lack of Wealth Is Caused By Ignorance

The above statement is not meant as derogatory to anyone who is not wealthy. The point I am making is that I believe one of the main reason most people either get into financial trouble (I am referring to debt problems here) or fail to be as rich as they could be is because they are simply unaware of the concepts of financial planning, investing and financial discipline.

I have heard many people say the reason they got into debt was because they simply lost track of their spending or they didn’t realize how much debt they had until it was too late or that ‘things simply spiralled out of control’. I firmly believe that most of these people could have avoided the stress and strains that excessive debt caused them by being more aware of their finance and planning their spending better. The most effective way to do this is by setting yourself a financial budget or spending plan.

Successful Businesses Do It

The aim of businesses (be they a small one man operation such as a plumber or a multinational corporation like Coca Cola) is to generate profit for their shareholders. Virtually all successful businesses do two things regularly, without which they would more than likely not be as profitable;

1. Produce Annual reports – to explain and analyze their profits and expenses
2. Set internal budgets – to control costs and help generate profit

Think about this for a minute. If it is common convention amongst business managers that these two measures are essential if the business is to stand a chance of generating profits and being successful, why do the vast majority of individuals not take a similar approach to their own personal finances?

Budgets Allow Financial Reliability and Predictability

Have you ever run out of money at the end of the month? Not sure if you can afford that holiday next year? I could go on but the point I am trying to make is that by doing a budget as part of your financial planning you can introduce some predictability to your finances. This means you can effectively plan for the future. This may be planning to move to a larger house in a couple of years time, it might mean planning a big night out next month or even an early retirement.

Makes you richer by putting your money to better use

Budgets can make you richer in two ways. Firstly one of the main benefits of setting a financial budget for yourself is that it helps your stop wasting your money. Budgets are great at trimming the fat from spending whether they are multi million pound corporation budgets or on a personal level they simply stop money being wasted.
If you budget well you’ll have an amount of money left at the end of each month which you would not otherwise of had. This makes you richer than you were before in the sense that your disposable income has increased, freeing money for you to spend on things you wouldn’t have been available to afford.

Makes you richer by allowing you to invest savings

OK so if you budget you can increase your disposable income as we have just discussed above. If you are even smarter you don’t spend [all] of that extra disposable income, but instead invest it.

By investing the extra/saved money you now have you can hopefully generate new income (assuming you invest it wisely – more on this later) and wealth that you previously didn’t have. This means that if you follow this approach your net wealth will increase over time, or in other words you will get richer.