Bayport Blog

Personal budgeting is the key to long-term financial rewards

Personal budgeting should be the basic and primary foundation for every individual household, whether you live salary-to-salary, or earn a six-figure income a year. If you do not know where your money is going, it is near impossible to ensure that your long-term financial health will remain sustainable.

Financial planning isn’t only for businesses, it is an essential part of securing your and your family’s financial wellness. A personal budget shouldn’t only be started when in crisis mode, or when you are already under financial stress. When you are managing your budget well and have a clear grasp of your finances, you will not only remove the financial stress from your life, but you will feel a far greater sense of financial freedom that will result in a far more rewarding lifestyle, together with a sense of security and stability for your financial future.

Personal Budgeting tips for every household

Here are some budgeting tips that can help you and your family achieve financial health and rewards:

Plan and manage your budget together

If you are married, it is always a good idea to be transparent with your partner to ensure that the entire household is committed towards supporting the family’s future financial wellness. If you and your spouse or partner sit together and have a set financial planning or budgeting day once a month, you can collectively share your input, concerns or suggestions to ensure that everyone is on the same page. If you are single, it might even be a good idea to find someone you trust and are comfortable with, that will act as your accountability partner to ensure that you stick to your goals and perhaps give you some external perspective on your financial plans and money management.

Set shared goals and rewards

Once you have a clear understanding of your current financial situation, it is essential that you set immediate short-term goals, medium-term goals as well as long-term goals; and share these with the entire family so that everyone is supporting and working towards these goals collectively.

• In the short-term; these goals might include paying of immediate debts to remove any financial or debt stress that could have an extended impact on you or your family’s general emotional or physical health.
• Medium-term goals could be planning to set money aside for studies, buying a house or a new car; or even planning to save for a family vacation together.
• Long-term goals would be those goals that are directed towards building financial wealth and future financial security such as planning for retirement, pensions or even growing an investment

Consider introducing interim incentives or rewards for achieving major milestones along the way as you work towards these goals.

Short-term pain for long-term financial gain

Once everyone is clear on the family’s financial goals they will be far more understanding of the reasons for sacrifices that need to be made in the immediate, and are likely to be more careful with spending money as they feel included in the rewards by contributing to achieving financial goals.

Don’t be a afraid to be transparent and firm about what needs to be trimmed. Once you start working through the numbers, you may realise just how much unnecessary spend you can actually cut out of your life that could lead to far greater rewards, pleasures and enjoyment down the line. Keep in mind that some budget cuts, such as dining out, entertaining less, or shopping for a new wardrobes may only be temporary. You can always make adjustments later on as you achieve your financial milestones.

Prioritise getting out of debt first

Before you start saving for your next holiday, your priority should be to clear your debt as quickly as possible. If you have many different loans or creditors to pay each month, investigate how much the interest and charges are costing you and consider restructuring your debt into a consolidation loan.

A debt consolidation loan allows you to combine all of your debt into a single loan, that is usually at a much lower monthly cost. Now you only have to worry about paying one single credit provider each month, which means less frustrating calls from multiple creditors, and this means less admin fees too.

A debt consolidation loan can go a long way in reducing debt stress, and will also give you an added sense of security and comfort if your consolidation loan includes credit life insurance to settle you loan, in the unlikely event that you become unemployed or unable to work.

Schedule your financial commitments.

Get into a routine. Budgeting also requires you to create a financial plan which includes specific dates that you have scheduled to meet your financial commitments. Set dates each month for making your payments, and ensure that you honour them on time, and that these payment dates are in line with your agreement with your providers. The best way to ensure that you meet your financial commitments on-time, ever-time, is to set up debit orders or to schedule automatic payments monthly.

It may also be a good idea to set specific days of the week or month which are your grocery shopping days. Creating a routine keeps you disciplined and helps go a long way towards being financially responsible, while taking the edge off any stress or oversights that could negatively impact your credit record.

Plan in advance for ad hoc expenses

Even though you may have a set budget, scheduled debits and routine shopping trips, there are some ad hoc expenses that might be different from month-to-month, which could be classified as miscellaneous or sundry expenses. If you know in advance that you have special events coming up such as birthdays, anniversaries, back-to-school supplies, or routine car maintenance; then plan for this well in advance. Rather put away a small sum of money each month that goes towards this, than being surprised with a sudden big expense that you have not planned for. Don’t allow these events and expenses to sneak up on you.

Keep track of your progress

It is important to check your progress against your financial goals regularly. As a family, become comfortable sharing your purchases so that you can track your spending against your budget, and then update the budget where you have either over or under planned. Keep your goals in sight and look back at your progress together regularly to see how far you have come, and celebrate all those little successes together.

Give yourself some grace as it may take a few months to get a handle on your budget. You are unlikely to get it right the first time, or even the second time; however if you work together as a team, stick to your plan, and continue to remind yourself of your goals; you’ll get there and enjoy the rewards as a result.

Should you require any assistance with consolidating your debt, or would like to speak to a financial wellness consultant, contact the Bayport Financial Services team.