The seven steps of effective budgeting
Financial expert Steve Cronin outlines how to create a monthly expenses budget you can stick to
If you are hopeless at sticking to a financial plan, tell your significant other, parents or friends that you are creating a budget and are committing to stick to it. Invite them to judge your impressive budgeting skills in a few months’ time.
Allocate one hour to go through all your credit card, bank and phone statements. Highlight any large items and note any late payment or interest charges. Sticking to one hour will ensure you don’t keep putting this off.
Identify your main types of costs – travel, food, rent, school, clothes, fun etc. Figure out roughly how much you spent on each over the past three months.
Figure out the large items that you can cut out easily without really affecting your life. Gym memberships, brunches, drinks, shoes, gadgets, credit card late payment fees and cable TV packages are common targets.
Create a budget for each category based on your recent months, minus the big items you can chop, and minus 10 - 20 per cent to reflect your newly disciplined self.
Track how you do against your budget, being extra tough on yourself in this first month. Set aside some of what you save this first month as a reward to yourself. Use an app like Wally to make tracking easier.
At the end of the first month, figure out what worked and what didn’t. Pick one category per month to cut drastically. You may discover that category never needs to go back up again, as you learn to enjoy life without splashing the cash.
Updated: October 23, 2017 03:55 PM