Budgeting is the foundation of personal finance and the most powerful tool to allocate money. In keeping to a well-designed action plan, you will never end up living beyond your means. Yet, most people ignore income management and find themselves in debt.
People whose income fluctuates from month to month are concerned most. Don’t know how much you’ll earn this time around? This is also stressful! Budgeting could help you cope with the stress. How could you manage expenses if the most important variable, this month’s income, is missing? Amazing budgeters have found a way out: they calculate based on what they earned last month.
Getting one month ahead is an efficient money management strategy with huge benefits:
- It takes much of the stress out of your budgeting. You become relaxed because you have a financial cushion to pay the bills.
- This budgeting plan enables you to stick to and benefit from the main principle of personal finance: ‘spend less than you earn’.
- Getting one month ahead means you create a realistic zero-sum budget. You rely on facts and numbers, rather than forecast your future spending.
- It helps keep track of your expenses and avoid living paycheck to paycheck. You can analyse your previous purchases to see which were reasonable and which were a waste of money.
- Budgeting one month ahead stimulates you to save a bigger share of your income. By saving, you reach your financial goals faster and enhance abilities to live a debt-free life.
With such overwhelming advantages appearing, one-month-ahead planning is quite simple to stick to. Here are three main steps to taking this path of reasonable budgeting:
- Find out how much you spend every month and record your expenses in writing or track them with a budget app. Most electronic budgeters are free to download, but some sell premium ad-free accounts and extra tools. In addition to inputting transactions, such apps may offer various extra features, for example, to categorise expenses by type, date or location, to monitor investments or to optimise credit card rewards.
- To get started, you’ll have to save a month’s worth of your expenses. Although it may seem challenging at first, put money aside step by step. Try not to indulge in expensive purchases for some time. Open a savings account and set up an automatic deposit of a comfortable sum of money into the account each week. Another good idea is to throw a garage sale or to find a part-time job to make extra income. It can take a few months but keep in mind what you want to get.
- Time to draw up a new money management strategy. Once you’ve saved enough for expenses, start a new month with the money you’ve put aside. Pay the bills and make purchases within the set limits. Don’t exceed your budget, and your regular income will remain untouched. You’ll put it into play next month.
Getting one month ahead will help you make good progress in budgeting and saving. You’ll find it helpful regardless of whether you make a fluctuating or stable monthly income.