How Your Budget Can Fix 5 Common Money Problems
When it comes to money, each one of us face unique problems. Our finances are truly personal, which is the reason why, one-size solutions seem like a waste of time. Having the knowledge of you where your money goes is the first step towards making sense of your finances. But it can happen that even though you’ve started tracking your money religiously and even budgeting, you are still facing some stubborn money problems.
You may still be spending more than you earn or running out of money too soon or overshooting your budgets. How, then, can you set this straight?
Here are 5 common money problems and how small changes in your budget can fix them:
5 Common Money Problems That Can Be Fixed By Tiny Budget Tweaks
That Stubborn Category
You may be doing well in most fields of your budget, but there would be that one stubborn category that pulls you down every month. For some it may be shopping and for others it may be dining out. You have tried all you can, but haven’t been able to tame your spending in this category.
Thanks to Wallet’s features like Spend by Categories, pie-charts and Labels, it is easy to identity this black sheep in your finances. Once you know where you’re going overboard, try to shake up the way you handle these expenses. The first step is to create a separate budget for this category and set how much you wish to spend on it.
Now, try switching to spending on that specific category only in cash. In this way you can be more mindful of how much you spend.
Or, try to challenge yourself to keep the budget bar for that category orange, if not green. At the end of the budget period, you can move the money you saved to a goal that you had been saving towards.
If the category is something you cannot cut down on, inspect other areas where you spend. You may need to reexamine your spending priorities and cut down on some other spending to balance out this excess.
Quick Cash Shortages
Another common problem a lot of people face is that they experience periods of financial famines and windfalls, depending on what time of the month they get paid.
For instance, in Prague, where BudgetBakers is based, the payday usually falls in the middle of the month. And, all the bills are scheduled towards the end of the month. So it is common that once you get paid and pay off your bills, a chunk of your pay vanishes in the first two weeks. In the next two weeks, it then becomes a battle for survival, when you struggle to even cover for your groceries. The only apparent solution to this then feels like the arrival of your paycheck.
What you need to take into account when you create a budget is the way your finances are structured. Such cash shortages can arise when you blindly follow some budgeting methods.
One way you can avoid this is by dividing your month into weeks and by setting weekly budgets and limits. To actually enforce these limits, either maintain only the weekly limit in your current account, after having moved the rest to your savings account, or, withdraw the money in cash and spend only that throughout the week. This will help you stop spending when your weekly limit is up.
You can set up weekly budgets on Wallet and be warned if you’re likely to overspend that week. Budgeting need not be a monthly affair. Yet another budgeting myth busted.
Insufficient Cash Flow
Now, what if, unlike in Prague, you’re paid every week? Or twice a month? Then you’ll find yourself experiencing a completely opposite problem. You may not find enough money to pay off your bills in the beginning and be left with enough and more money towards the end of the month.
Plan for your upcoming payments. When you have the surplus period, plan and put aside a part of your money to cover expenses at the beginning of the next month. You could save a percentage of your paycheck, so that you’ll not be left having no money to spend on groceries and other entertainment costs for the current period.
A good way to make sure you don’t default on this is by automating your savings. Decide on how much you plan to save from every paycheck and automate it to go to an account from which you can pay for your expenses in the following period. Create a budget for the rest of the amount and track your spending to make sure that you don’t overspend in those categories.
Arguments over money with your partner
Some people find that they are great budgeters if they’re on their own, but end up being controlling and resentful once they bring in their partner to the equation. Budgeting as a couple is not the same as budgeting on your own, because here communication plays an important role. When you start managing money with your significant other, you may end up fighting about expenses because there is a lack of clarity between the two of you.
Share your finances. If not all of it, share a part of it that you manage together. We mean not just figuratively, but literally. Use Group Sharing on Wallet to make sure that your partner is on the same page when it comes to your family budget. Your transactions are updated as and when they are tracked, giving both of you a clear idea about how much money is available to be spent at any point of time. This will help you avoid unnecessary bickering over money.
You may have done everything right, but you find that you aren’t able to push your expenses down below your income level. Month after month, you are repeatedly finding it harder to cover your bills or limit your expenses.
Such a situation may be pointing at an income problem. You may not be earning enough. But that is not something you can change overnight. So how do you then fix it with your budget?
Create two labels–one for needs and another for wants. Go to your last month’s spending and label what transactions with either of these labels, depending on whether that spending was made to satisfy a need or a want.
Next, identify the specific categories with the highest spending. Examine them. Do all the categories you marked as a need qualify for things that you absolutely cannot live without? Can you swap at least some of it to your wants category? And, is there any way to cut down on your spending on wants? Look for the lowest spend here. You may find that cutting out expenses starting from the smallest to largest might work better for the wants category.
Create two budgets with these labels and track your spending for the next period. Examine the changes. Once you’ve managed to cut back your spending for three consecutive periods, you can start adding back to the categories that you really miss spending on the most. Meanwhile, you must also try to look for newer income sources as this will be the permanent fix to such a problem.
The two most important tools that will help you handle your money better are the right knowledge of what your money does and the right tools to make sure your money can be redirected to do what you want it to. Like we always say, budgeting is not rocket science. It is a powerful tool that lets you plan for and reach your financial goals effortlessly.
Over to you…
What common money problems have you fixed with tweaks in your budget? Let us know in the comments section below.
Also published on Medium.