Managing finances is much more effective if you have a budget, whatever your financial situation. By drawing up a budget, you know how much you need daily or monthly so you can decide which expenses to reduce. Making a budget isn't necessarily fun, but financial freedom makes life more enjoyable. So, take the time to evaluate your spending habits and come up with a realistic financial plan!
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Method 1 of 3: Creating a Budget
Step 1. Prepare a budget by calculating the difference between income and expenses
The first step in drawing up a budget is to add up the money received in a month. Then, add up the money spent in a month to buy food, pay bills, or other necessities of life. Finally, calculate the difference between income and expenses to find out the size of the surplus or deficit.
- Income can come from salaries, gifts from family members or others, honoraria, or payments from clients.
- Expenses are money used to pay rent or house installments, vehicle installments, insurance premiums, and other needs, such as food, clothing, books, and recreation. Some expense items, such as rent or house installments, are the same every month. Other expense items, such as food purchases, fluctuate from month to month so you need to calculate the average for the last few months.
- If you want to learn how to create a budget, read the wikiHow article on financial planning.
Step 2. Limit your spending within your budget
Done recording expenses to pay for all monthly needs, find out the habits of using money that have been applied so far. If you tend to be extravagant, start saving so that you have funds available for savings.
- Do a cost breakdown to find out what you're paying for. For example, enter the cost of renting a house, telephone, water, and electricity in the "Monthly Bills" group. The "Food" group consists of groceries and restaurant cuisine. The "Children's Needs" group consists of clothes and school supplies for children.
- If you don't need to cut expenses drastically, start saving by setting goals that are easy to achieve. For example, if you spend a lot of money on multiple cable subscriptions, cancel the one you watch the least, instead of all at once.
Step 3. Get in the habit of taking notes every time you spend money so you don't go over budget
In addition to limiting spending, you must monitor the funds used so that they do not exceed the specified limit. For that, determine the most effective way to ensure that you spend money within your budget, for example by recording every payment transaction or analyzing bank accounts and credit card bills at the end of each month.
You don't forget what you bought if you always record every purchase transaction, but for some people, this method is considered a hassle
Step 4. Reserve funds for recreation
Usually, a budget is of little use if there are no funds available to do fun things. If possible, allocate funds to enjoy what you enjoy best, such as traveling with friends or buying souvenirs.
- By setting a budget, you are using the money for something useful because you have already set aside funds to buy what you like.
- Be realistic. Do not push yourself if there are no funds available for this purpose.
Step 5. Allocate funds for savings
Many people can't save because their income is mediocre, but you will feel the benefits if you have allocated funds for emergencies or unexpected needs. When setting up a budget, make sure you save a little money each time you get paid. As the saying goes, little by little, gradually becomes a hill!
- Set realistic targets, such as saving a certain amount each month. If you are used to it, challenge yourself to save more.
- As a guide, you should have savings to pay for living expenses for 3-6 months in case you don't work.
Step 6. Put the cash in the envelope according to the budget
Maybe you have difficulty monitoring payment transactions if you often use cash when shopping. A great tip for dealing with this is to put cash in several envelopes. Buy a label for each envelope according to the post of each expenditure and use the money as limited as what is in the envelope.
- For example, prepare several envelopes and label them, "Food", "Clothing", "Medicine", and "Recreation". If you want to have dinner with friends, use the money from the envelope labeled "Recreation".
- If it's not enough, don't take money from another envelope. This method makes you short of funds for other expense items.
Step 7. Include the due date of the monthly fee bill on the calendar so that it is paid on time
Use your calendar, agenda, or phone app to keep track of the monthly fees you need to pay and the due dates. That way, you pay off your bills on time so you don't incur fines or penalties.
Late paying bills has a bad impact on your financial condition in the future. In addition to lowering your credibility, you're incurring higher interest rates on your loan or mortgage and thus having to spend more money
Method 2 of 3: Applying a Budget Consistently
Step 1. Don't spend money impulsively
Lately, the opportunity to use money is wide open. You must have discipline and strong determination if you want to implement a consistent budget. Even if it's difficult, remind yourself of your motives for making a budget when you want to buy something you don't need. Also, don't fulfill your friends' invitations for recreation together, especially if you tend to be extravagant when traveling.
- Don't come to a place where it's tempting to overspend. If you shop online frequently, unsubscribe from promotional emails so you don't receive advertisements or product offers.
- When traveling, carry a budgeted amount of cash with you.
- Say a spell when you want to waste money. For example, if you want to save for a vacation, say the mantra, "Vacation to Bali!"
Step 2. Start saving via automatic transfer
Get in the habit of transferring money from a payroll account to a savings account once a week. Saving is a lot easier if you haven't had time to withdraw cash.
- Make automatic transfers to save and pay health insurance premiums.
- If you receive a salary in cash, immediately separate the money to be saved before being used to pay for other needs.
Step 3. Set targets to challenge yourself
So that you can manage your finances well, give yourself challenges, such as bringing lunch to work for a month or not buying new clothes for 3 months. You need to motivate yourself to be able to form new habits.
Tell a friend about the goals you've reached so they can support you
Step 4. Don't use a credit card, unless you can afford to pay off the bill
When paying for groceries with a credit card, you usually don't incur interest if the bill is paid in full every month. However, you have to pay interest if you pay a debt of a minimum bill until the balance is nil.
Using a credit card provokes the desire to shop because you feel you can pay. Don't use a credit card if you're having trouble limiting your spending
Step 5. Do not give up, even when the target is not achieved
Managing finances responsibly is very important, but don't beat yourself up if you occasionally overspend. Even if you've wasted a lot of money, focus on the goal you want to achieve. Don't give up until you reach your target.
Remember that forming new habits takes a lot of time. If you are having trouble reaching your target, don't give up easily! Sometimes, this is a sign that you need to change your budget instead of cutting back. So make sure you evaluate and adjust your budget once a month
Method 3 of 3: Saving
Step 1. Compare the prices of goods in several stores before shopping
To get the best deals, use the internet to compare prices for the same item across multiple sellers, such as a supermarket, school supply store, cell phone outlet, or car dealer. So take advantage of the tools available to make sure you don't waste money.
Before shopping, look for the product you need through websites, such as Tokopedia, Lazada, or Bukalapak to compare the prices offered by several online sellers
Step 2. Take time to cook food at home
Maybe you don't eat in restaurants very often, but without realizing it, you are spending a lot of money on packaged foods and snacks at the supermarket. Avoid this by compiling a meal menu before shopping and then making a list of the ingredients you need. Time to shop according to the list once a week.
- To save even more, look for stores that offer discounts and prepare several menus using the same ingredients.
- If you've found cheap groceries or products, buy a few and store them in the refrigerator for a few days to use.
- Prepare delicious dishes from cheap ingredients. For example, when cooking noodle ramen, add eggs and thinly sliced onions for a better taste.
Step 3. Buy used and discarded items
You can save money by buying used items instead of new ones. Visit a thrift or thrift store to find the product you need. Buy clothes on sale at your favorite fashion store so they are cheaper.
- When shopping through websites, look for stores that offer "free shipping with no minimum purchases" or use membership promotions that offer free shipping.
- Make sure you check out thrift and auction websites online! Be careful if you want to meet someone to buy something. Invite a friend or partner to accompany you to be more secure.
Step 4. Unsubscribe from cable television if you frequently watch streaming videos on multiple websites
If you watch movies a lot on Netflix, Prime Video, or HBO, consider whether or not to stop cable television. Many people unsubscribe from cable TV to reduce monthly expenses.
