Budgeting 101: How to make do with what you earn

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Admit it or not, flipping cash over your palm and spending money that you work hard for is a wonderful and liberating feeling. You’ve got financial freedom, after all. You can shop all you want, eat anything and anywhere you want or even party up all night with no worries.

Spending nonchalantly, however, especially in the midst of high inflation rates, harsh economic conditions and skyrocketing prices of commodities, can be your worst nightmare.

It goes without saying that you should know how to budget your hard-earned money or run the risk of waking up one day buried in a mountain of debts, overdue bills, and drained bank accounts.

So before this happens, here are some tips to help you live within your means.

1. Know how much you earn. The very first step in managing your finances is knowing how much money you regularly earn in a given time.
   
   
   Photo Credit: www.SeniorLiving.Org via Flickr (Creative Commons)
   
   This helps you determine your limits and devise a feasible plan for all your expenses. Now if you’re the type who doesn’t have a regular income (e.g. project-based, freelancer, etc.), work the other way around by finding out first how much you spend. This way, you will have an idea of the minimum income you need to target to be able to support your expenditures.
   
   
2. List down and compute your total expenses. This includes your everyday expenses for food, transportation, personal hygiene, your expenses for gimmicks, regular bills for electricity consumption, rent and what not’s.
   
   
   Regularly check your credit card statements for purchases you may have forgotten about. Photo credit: Lendingmemo.com
   
   You can do this on a weekly, bimonthly or monthly basis depending on your preference. Having a breakdown of your expenses lets you know how much of your income should be set aside for all the bills and how much should be spared for your other budget categories.
   
   
3. Save, save, save. No matter how easy or hard you earn money, one thing remains true – it’s easy to lose it.
   
   
   Photo Credit: iStock
   
   So make sure that you keep a portion of your income for long-term financial security goals. Having cash in the safe can also help when there are emergency situations. This way, your original budget will not be ruined by  unexpected but necessary expenses.
   
   
4. Don’t spend more than what you earn. Obviously, you will never save up money if your bills always exceed your earnings.
   
   You will definitely have a budget deficit if this is the case. Evaluate whether you’re spending too much for food, internet, clothes or other items. Find ways on how to cut down on expenses on household utilities.
   
   
   Do you really need new clothes? Always ensure that you buy only what you need. Photo credit: pictographic (via Creative Commons)
   
   Also, make sure to distinguish wants from your needs. Securing your needs first before even devoting a cent to luxury is a must.

Indeed, budgeting money can be really nerve-wracking with all the calculations and balancing involved, but once you get the hang of it, your wallet won’t be bleeding dry. You’ll surely live a life that’s comfortable and debt-free.  

Check out Business Directory for a list of companies which offer legal personal loans in Singapore.