No matter what Facebook group I visit, whether it be in South Africa, Kenya, or even America, one thing has become abundantly clear. Everyone, and I mean EVERYONE is feeling the pinch in their pockets. Most households have had to drastically cut down on their spending habits in order to afford the rising costs of housing, fuel, schooling, and even basic needs like food.
In our Empowerment Series, we are going to look at a few useful ways you can save money. In today’s blog, we going to delve deeper into the importance of drawing a budget to help you analyze and track your spending habits.
Do you really know where you spending all your money at the moment? I recently took a deep look at all the transactions on our banking app, from debit orders to card payments. I was quite shocked when I totaled how much money was going to bank fees, debit orders for things we no longer needed, and how much money was being spent weekly at the local grocer to keep the household running. When last did you take a good look at what is going on in your bank account? This is why it is vitally important to start tracking and analyzing your expenses.
Maintain a Detailed Record:
Keep a record of all your expenses, including small purchases. You can use a notebook, a spreadsheet, or even a mobile app designed for expense tracking. Be sure to note the date, amount, and category of each expense.
Categorize Your Expenses:
Create categories that reflect different aspects of your spending, such as groceries, utilities, transportation, entertainment, and so on. Assign each expense to the appropriate category. This helps you identify areas where you may be overspending.
Take advantage of expense-tracking apps or personal finance software. These tools often offer features like automatic expense categorization, receipt scanning, and spending summaries. Some popular apps include Mint, Personal Capital, and YNAB (You Need a Budget).
Make it a habit to save receipts for all your purchases. This will help you accurately record expenses and reconcile them with your bank or credit card statements.
Review Bank and Credit Card Statements:
Regularly review your bank and credit card statements to cross-reference your recorded expenses. This allows you to identify any discrepancies and ensures that you haven’t missed any transactions.
Set Realistic Budgets:
Once you have a clear picture of your expenses, you can set realistic budgets for different categories. Compare your actual spending with your budgeted amounts to identify areas where adjustments are needed.
Analyze Spending Patterns:
Look for trends and patterns in your spending. Are there particular months or seasons when your expenses are higher? Are there certain categories where you consistently overspend? Analyzing these patterns can help you make informed decisions about where to cut back.
Create charts or graphs to visually represent your spending. This can provide a clearer picture of your overall spending habits and make it easier to identify areas for improvement.
Regularly Review and Adjust:
Take the time to review your expenses regularly, ideally on a monthly basis. This allows you to stay on top of your spending and make necessary adjustments to your budget as circumstances change.
Are you currently using a monthly budget to track your income and expenses? If not, WHY NOT?? I can’t emphasize how essential it is to start drawing up a budget so you can see exactly what you are spending your money on. One of our family goals for 2023 was to get into a position of saving more money and being more frugal in our spending habits. Once you put things down in black and white you might get a jolly big fright! I know I did! Since we have been tracking and analyzing our spending habits, we have been able to make better decisions before we just tap or swipe. This has lowered our anxiety as we are no longer walking around like blind mice. Sitting together as a team once a month with your budget is time well spent. Discussing financial goals such as saving for that family holiday, upgrades to your home, or replacing bigger items like furniture, with your budget in hand will empower you to make better decisions on your spending and saving habits on a day-to-day basis.
A budget provides you with a clear overview of your income and expenses. It allows you to take control of your finances by ensuring that your expenses align with your income. Without a budget, it’s easy to overspend and lose track of where your money is going.
A budget helps you set and achieve financial goals. By allocating your income toward specific objectives, such as saving for a vacation, paying off debt, or building an emergency fund, you can track your progress and stay motivated. A budget serves as a roadmap to help you reach your financial aspirations.
Prioritization of Expenses:
With a budget, you can prioritize your expenses based on their importance. You’ll be able to differentiate between essential expenses, such as housing, utilities, and food, and discretionary expenses, such as entertainment and dining out. This helps you make informed decisions about where to allocate your funds.
A budget is a valuable tool for managing and reducing debt. By including debt repayments as a fixed expense in your budget, you can allocate a portion of your income to paying off loans, credit cards, or other debts. This systematic approach helps you stay on track and make progress toward becoming debt-free.
Improved Saving Habits:
Budgeting encourages you to save regularly. By allocating a portion of your income to savings, you build financial security and create a cushion for unexpected expenses. Whether it’s for short-term goals or long-term investments, saving becomes a habit that can lead to greater financial stability.
A budget promotes financial awareness and mindfulness. It allows you to review your spending habits, identify areas of unnecessary expenditure, and make conscious decisions about how you allocate your resources. This awareness helps you make smarter financial choices and avoid impulsive or wasteful spending.
Life is full of unexpected events and expenses. Having a budget in place prepares you for unforeseen circumstances. It allows you to adjust your spending and saving priorities when necessary, ensuring that you can handle emergencies or changes in your financial situation.
Communication and Collaboration:
If you share finances with a partner or family members, a budget facilitates open communication and collaboration. It helps align everyone’s financial goals and ensures that all members understand the household’s financial health and obligations.
Time for you to do some homework! I challenge you to draw a bank statement or look at your banking app, then start calculating exactly where and on what you spending your money. If you not using a budget yet, NOW is the time to start using one. Adopting these practices into your lifestyle will go a long way in holding everyone accountable for their spending habits. This in turn will allow you to make more informed decisions when it comes to spending and saving.
Stay tuned for more content in our Empowerment Series where I will be looking at more practical ways you can save money. I always value and appreciate your comments, suggestions, and feedback. Let me know your thoughts in the comment section below. Did you find this content useful? What tools are you using to help you save money?
Article written by:
Lauren van Rooyen
Founder and CEO of MomBoss Market Space