Many of us have dreams and goals that we would like to fulfill at some point in our lives, but it can sometimes feel like they are aspirations that are not going to be fulfilled when you take a look at your monthly budget.
Paying your bills and putting money away is a balancing act that often feels heavily weighted towards spending in particular, but there are some ways to work out a way to save for those special moments you have got planned.
Here is an overview of why goals are essential to your budgeting plans, a look at a useful way of allocating your monthly cash, plus some tips on how to get into a savings habit.
It all starts with goals
There is a persuasive argument in favor of setting future goals to aim for before you sit down and create a personal budget.
These goals can vary from saving for a dream holiday to clearing off your debts by a certain time in your life. The main point is that by setting these financial targets to reach that are important to you, it can provide the right level of motivation required to cut down on your spending and find a way to make these things happen.
You obviously have to apply a dose of realism to your plans, based on the amount of income you have available to work with. But you are much more likely to stick to a budget and skimp on a few treats if you know the money you are saving is going towards achieving some of your goals.
Finding the right percentage
If you are looking for a bit of guidance on how to divide your money up each month and how you should be allocating your cash in the best possible way, you might want to take a look at a guideline known as the 50/20/30 rule.
These numbers are suggested percentages. 50% of your monthly income should be allocated to essentials like mortgage or rent, utilities, and food. The next 30% should be spent on personal expenses and the final 20% of your money needs to go towards your savings goals.
It is a good discipline to sit down and allocate your current monthly costs to these different categories so that you can see how in line your spending actually is with this guideline.
Use the 50/20/30 rule to see where your cash is going and where savings can and should be made to fall in line. If you are spending more than 30% of your income on personal expenses, this is an area that you can target to see if you can make some changes to your expenditure.
If you are paying off several credit cards each month, for example, you look at the benefits of consolidating to see if that will get your monthly payments down to a more manageable level and save you some charges.
Get into good financial habits
It can be easy to promise yourself that you will put away some extra cash towards savings and then either forget to do it or find something else to spend the money on.
Set up an automated payment for an amount that you know you can afford out of your budget. That will help to ensure that a regular payment is transferred to your savings and it will soon become a part of your regular budget without even thinking about it.
Setting a budget, transferring money to savings via an automated payment, and reviewing your budget regularly, are all good financial habits to get into and can help you to make some of your dreams become reality.
Leon Hunt writes about personal finance matters, especially when it’s aimed at couples as money is the thing most often fought over. He shares some tips for saving as well as covering the practicalities of loans etc.