When it comes to "financial management," many often associate it with saving or investing money. However, managing the money you spend in your daily life is just as crucial as accumulating wealth or achieving financial gains. Effective money management can not only reduce unnecessary expenditures, freeing up funds for savings, but also increase overall satisfaction with spending habits. If you find yourself consistently running out of money despite seemingly having none to spare, it's time to consider managing your expenses. Among various financial management methods, maintaining a budget, or "budgeting," is a powerful tool that allows individuals to self-reflect and analyze their spending patterns.
The author shares their personal experience of maintaining a budget for over 1,300 days, highlighting the positive changes in their expenses and savings since starting. Writing a budget has become such an integral part of their routine that they feel incomplete if they skip even a single day.
However, the author admits that they faced several challenges and uncertainties when they first started budgeting. They understand that beginners might have similar concerns, and to address this, they offer valuable guidance on selecting the right budgeting method and tips for consistent budgeting.
There are four main types of budgets that individuals can choose from, and the choice largely depends on personal preferences and habits:
1) Manual Budget: This is the traditional way of budgeting, where individuals use paper-based budgeting forms, notebooks, or create their own templates to record expenses. It offers the advantage of a psychological stimulus when manually writing down expenditures and allows easy retrospective analysis of overall spending trends. However, it may require more time and the use of calculators during calculations.
2) App-Based Budget: Budgeting apps available in app stores offer a wide range of options, both free and paid, catering to various preferences. These apps allow users to conveniently record expenses on their smartphones and some even offer automation by importing transaction data from credit card SMS messages. However, some apps might be overly complex for beginners, so careful consideration is necessary when choosing one.
3) Online Budget: Online budgeting platforms available on portal sites enable users to create charts and graphs to analyze spending patterns over time. While this method is convenient, it might be less accessible when internet connectivity is limited. Moreover, some sites might offer features unnecessary for budgeting beginners.
4) Excel Budget: Creating a personalized budget using Excel on a computer allows for more flexibility in formulating custom formulas and categories. It enables users to perform detailed statistical analysis of expenses under various categories. However, individuals not familiar with Excel might find it less user-friendly, and regular backups are necessary to safeguard data.
Regardless of the chosen budgeting method, consistency in recording expenses is essential. The author shares four key tips they have learned from maintaining their budget for an extended period:
1) Categorize Expenses: Dividing expenses into major and subcategories allows for a better understanding of spending patterns. For instance, under "food expenses," subcategories like "lunch with friends" or "coffee/refreshments" can be specified to track spending more accurately.
2) Evaluate Expenses: After recording expenses, the author encourages adding personal feedback and thoughts about each spending item. This helps identify areas where spending can be praised and areas for improvement, allowing better planning for future expenses.
3) Plan Ahead: To avoid stress from unplanned expenses, the author suggests making spending plans based on past records. By setting up a budget for specific events or occasions, individuals can avoid impulsive or excessive spending.
4) Add Fun Elements: The author recommends incorporating elements of fun and reward into budgeting, turning it into an enjoyable activity. For instance, setting up personal goals like writing the budget continuously for a week or a month and rewarding oneself with a treat for achieving those milestones can make budgeting feel like a game.
In conclusion, budgeting is a powerful financial tool that can help manage expenses effectively and lead to wiser spending decisions. Whether using manual methods or technological aids, consistent budgeting can foster better financial habits and ultimately lead to a more satisfying lifestyle.