How To Manage Your Spending By Using A Personal Budget
Last week we discussed how to make a personal budget. This was far from easy but drawing up a budget pales in comparison to the heroic effort needed to meet your budget. This is where the vast majority fails in just a few months. You must have plans to sustain your budget!
Those who have succeeded have adopted various strategies and tactics to reach their objective. Check out the budgeting tips below to see what suits you:
Review your budget first and see if it is realistic and attainable. The famous philosopher George Santayana may have been thinking about personal budgets when he said the famous aphorism, “Those who cannot remember the past are condemned to repeat it.” In the light of this reality, we must recall our previous battles against excess spending to see where we are likely to fail and to adopt new measures that can prevent the recurrence.
Always have your budget and a calculator with you. The majority of those who make personal budgets leave them at home and then forget about it as they go on spending as usual. Most phones already have a built-in calculator and notepad where you can input your budget. Always refer to your budget before deciding to purchase.
Discuss your budget with all persons that may be affected. Unless you are single and have no dependents, it is inevitable that you will need the cooperation of other people especially if you have a spouse. This issue is so complicated that entire books could and should be written on how best to handle this.
Regularly update your budget. Circumstances may change; there will be a need to change your targets from time to time. Both income and expenses may increase or decrease. I suggest that you review your personal budget weekly to see what must be amended.
Understand that not all assets are desirable. Most people think that an asset is a good thing to have. However, different assets have different financial effects. There are assets that appreciate in value and produce income like rental property, and these are the most desirable. On the other hand, there are assets that are a financial drain. The most notorious example of this is buying a car for personal use. Not only do cars depreciate rapidly, but maintaining them consumes a large amount of money. Another asset that is often overrated is housing. The purchase of a house too large for your needs or your capacity to pay can drain your resources for other critical needs.
Assess the benefit of forced savings. For many people, being forced to save is necessary. This is one of the reasons why real estate is such a popular investment even if the property has little or no earning potential. You are forced to pay the monthly amortization, and unlike time deposits, it is not easily liquidated for purposes that are not in your long-term financial interest. Besides real estate which may be too expensive or too illiquid for some, there are other ways to have forced savings like pre-need plans. However, the closures of some prominent pre-need firms have caused many people to shy away from them.
Make haggling a habit. A long time ago all of us were experts in haggling because there were no fixed prices. But with the coming of malls, we have become used to simply accepting the indicated price. The truth is there still are opportunities to bargain with prices in the case of large items like furniture and appliances. However, such opportunities don’t come so often. Try practicing at flea markets to hone your skills. When you are good at negotiating for small items, you will have better skills when a large transaction comes along. Besides this, even the small transaction adds up to a large amount in a year’s time!
Check out group buying sites for bargains. The phenomenal success of group buying site Groupon in the United States has spawned several similar sites here. These sites give group buyers huge discounts. Used wisely this may help you save a substantial amount. Just make sure you really do need the items offered, otherwise this will just increase your spending.
Leave your credit card at home! If you are an impulse buyer, then leave your credit card and ATM at home and just bring enough cash to buy what you had planned so that you would not be tempted to overspend. And if you do use your credit card, avoid paying in instalments not just to avoid the interest expense but to reduce your expenses. Practice delayed gratification and just purchase when you already have the money.
Having control of your personal finances is necessary not only for surviving the present but also for achieving your dreams. Just getting by is not enough—you must have a plan for your future. Your personal budget is the key tool to reaching your financial objectives.
*Originally published by the Manila Bulletin. C-8, Sunday, November 4, 2012. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.