When you're so broke you pay for taxi rides in 20 cent coins, you're probably not following a budget. After all, what is there to budget for when you have no money anyway, right?
The bad news for lazy, broke people is that you do need a budget, perhaps even more than others do.
What's a budget anyway? Well, to create a budget you simply divide your spending into various categories like food, entertainment and transport. Then you allocate an amount for each of these categories. To stick to your budget, you need to ensure you don't overspend in any of the categories.
You might think this is totally unnecessary considering you end up with the same amount at the end of each month (a big fat zero. But guess what, that's one hole your budget might actually dig you out of. Here are three reasons you should start budgeting today.
Helps you to see where you're spending too much
If you're living from paycheck to paycheck and have no emergency fund, you need to lower your monthly expenses as soon as you can, before you get totally wiped out by an unexpected expense like your dog choking on a bone and having to be rushed to the vet.
Creating a monthly budget forces you to examine your current expenses, since you now need to record every cent you spend.
After tracking your budget for a month, you might realise that you've been spending a high amount on food because you eat out too much. Or you might realise that every month you lose money to an unnecessary subscription to Teenage magazine, even though you're now old enough to be the parent of a teenager.
If you don't save anything each month, creating a budget helps you to see which areas you could be spending less in. You may not like to admit that you spend too much on hair removal/hobbies/hookers, but the numbers don't lie.
Forces you to stretch yourself to save
If you earn $3,000 a month and your budget lets you spend $3,000 a month, you're doing it all wrong.
The whole idea of having a budget is to make sure you meet your savings targets each month. So set yourself a bit of a challenge by making your budget just low enough to make you a little uncomfortable.
If you spend $500 a month on food and have dinner at restaurants twice a week, challenge yourself to lower your budget to $400, thereby forcing yourself to dine out only once a week.
Gives you a target to work towards
Virtually everybody in Singapore without a trust fund has told themselves in well-meaning but vague terms to start "saving more money".
Then H&M has another sale and all is forgotten.
What a budget gives you is a figure to work towards. Download a budgeting app like Wallet or Piggy Bank so you can track your expenses on the go, and see how much more you're allowed to spend before you bust your budget in each category.
It's all well and good to swear you're going to spend less on clothes this month. But if you've already decided to limit your monthly spending to $200, then you know even before you whip out your wallet whether a purchase is going to bust your budget, and by exactly how much.
In turn, that makes you that much more likely to put that sweater/shirt/latex bodysuit away or save it for next month.
If you're struggling to make ends meet, using a budgeting app can be a useful way to make sure you stay disciplined at all times.
Let's face it, when your entire food budget for the month is $300, you wouldn't dream of blowing $30 on a restaurant meal since that's 10 per cent of everything you get to spend on food that month.
This article first appeared on MoneySmart
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