4 Budgeting Tips to Help You Save More Money

By Chika

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Last Updated: August 30, 2021

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Human wants are insatiable, but the resources to achieve these wants are sparse and limited. This implies that we need to make do with what we find and determine the best way to allocate resources for optimal returns. Because we need to juggle between a litany of wants amidst limited resources, most often we are forced to prioritize. Drawing up a budget is one way which we use to determine how to distribute our sparse resources among numerous wants.

 

What is a budget?

A budget can be defined as a financial plan for a stipulated period (usually a year) on how to spend your money. It compares both income and expenses and is a way for managing both for the best possible financial returns. budgeting allows you to take care of unforeseen circumstances and capitalize on opportunities that would come up in the course of life. It ensures that you have enough money to pursue and execute the things that are important to you.

 

Budgeting is the first step towards investing and financial independence. When we want to exert better control over our finances, we usually start with a budget. It sheds light on our expenses, how much we need to save and possibly invest. A budget also highlights expenses we need to cut down or do away with if we want to achieve a stipulated target. It enables us to prioritize what goals we intend to pursue and how we intend to achieve them. 

 

Most people cringe at the idea of drawing up a budget for their expenses. This is because a budget brings clarity to our financial status and forces us to come clean with ourselves. However, drawing up a budget can also be simple and fun.

 

Budgeting tips to help you save more money

Several methods can help people develop better budgets and as such manage their finances more astutely. 

 

 

Envelope system

The envelope system is a strict budgeting system that helps you reduce frivolous spending without having to keep track of every purchase. This system entails having an envelope for each category of expense and setting a spending limit for each one. When you receive your income, you allocate a certain percentage to each envelope and use only that money for purchases in that category. Once an envelope is empty, you can’t spend any more money on that particular category for the month until the allotted time for a ‘refill’. 

 

For example, you can have an envelope for groceries, phone bills, utilities, etc. after allocating money for the month for each category you do not spend any money on the category even if the funds in the envelope are exhausted. 

 

The advantage of this type of method is that it enables you to keep your desires in check and stick to a strict fiscal plan. 

 

 

Pay yourself first

The pay yourself first budgeting system is a proactive budgeting strategy that promotes investing and saving as opposed to finding the best way to manage your money. This system entails taking out a portion of your income which you pay yourself in the form of savings or investing. 

After the amount has been taken out, you can build your monthly expenses around the remaining amount.

 

 This strategy ensures that even in the midst of growing expenses and responsibilities, you have an amount set aside for savings and investment. As such, you do not live from hand to mouth or exhaust your income on expenses. 

 

This budgeting strategy is good because it emphasizes frugality, it also enables you to take better control of your future finances by savings and investing thereby increasing the possibility of financial independence. 

 

 

The 50/30/20 budget

This budgeting strategy is a step up from paying yourself first. The 50/30/20 method takes a holistic approach to spend income by allocating 50% of income to necessities, 30% to wants, and 20% to savings. This strategy ensures that all aspects of expenses are tended to while ensuring that you have some amount left for savings or investment. 

 

 

The zero-based budget

The zero-based budget is an extreme budgeting approach that ensures that no money is left at the end of the month. This approach entails deliberate spending all income on expenses, savings, debt repayment, and whatever categories. The idea behind the zero-based budget is assigning a purpose to every dollar (or cent). This budgeting strategy is well suited to less disciplined spenders and meticulous planners alike. It makes monitoring your spending clear. 

 

 

The bottom line

Creating a budget can be the closest we come clean about our finances. It is the first step towards achieving financial independence and controlling the fate of our finances. Though we can never do away with expenses, we can control how we spend them. By adopting any of the budgeting strategies outlined above, we can take the first steps towards building a better financial future for ourselves.

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