This is why having a budget is a good idea

BudgetThe word ‘budget’ has negative connotations amongst most Australians. The ‘B’ word makes us think of limits and restrictions, no luxuries and definitely no fun. A budget is a burden and as miserable as we feel about sticking to it, we feel guilty if we don’t, but it doesn’t always have to be like this.

Having a flexible, feasible budget can save you a fortune in the long-run, and if you get the balance right, you should hardly feel like you’re saving at all.

Advantages of budgeting

The main advantage of budgeting is taking charge of your finances. The sleepless nights and stresses of worrying about your debts and bills can seriously affect your life and relationships, and knowing that you are in control of your money matters can give you the peace of mind that you need. Having a target, such as paying off a certain looming debt, is great motivation and will give you the inspiration you need to keep to the plan.

Sticking to a budget is a good way to help you save money for certain luxuries in the future, like holidays or home improvements. By making smart decisions about your spending in one area of your life, like going without your usual latte or taking a home-made lunch to work, you can put the cash that you would usually spend away to save towards something you really want. Giving yourself a goal means that you’re less likely to stray from your financial plan as you can visualise yourself tanning on the beach or cooking dinner in your brand-new kitchen!

Budgeting helps you to keep track of all your outgoing costs so that you know for sure that any energy and phone bills or credit card payments will be covered. Having a budget means that your finances are organised and accounted for and so any unexpected costs you may face won’t make such a dent in your bank balance as you’ll have savings to cover them. This will also help you to avoid running up late fees and charges.

Useful tips

. Do not make your budget too restrictive! You must be realistic about your financial outgoings otherwise you are certain to fall off the budget bandwagon. Budgets are personal and spending varies from person to person so cater to your own need, and if your first budget doesn’t fit, try again!

. Keep things simple. The key point is to spend less and save more and the rest is up to you to mould your budget to your lifestyle. Try to start with one area of your outgoings and cut down on costs there before moving to other areas. Your financial routine is one you’ve picked up over the years so don’t expect to change it all at once, this is a gradual process with long-term benefits.

. Don’t be too hard on yourself. Contrary to popular belief, budgets can allow for fun. Give yourself a treat allowance every week or month. Do be strict with yourself and don’t allow yourself to go over this amount or you could find yourself undoing all of your hard work.

. Make your plan as flexible as possible so you will be prepared for any changes in your family or financial situation. Also be sure to prepare for notoriously expensive periods in your budget, such as Christmas or children’s birthdays.

The information in this article does not constitute legal or financial advice. If you would like to discuss any of the above in greater detail, please contact your local Axis adviser.

Image Credit: Philip Taylor PT