Regardless of how much money you make, the way you handle your money will make the biggest difference to your financial situation. The following is a brief look at the top five budgeting basics.
Keep track of everything
One of the most important basics of budgeting is to keep track of absolutely everything related to your finances, regardless of whether it is money coming in or going out. Whether you use software programs or the old-school method of recording everything in a notebook, make sure you have a system that works. For those who just aren’t very organised, it can be worth having a professional keep track of your finances for you.
Keep all your receipts
While it is all well and good to document your finances, it is important that you have a way to provide proof of it all, so make a habit of keeping all your receipts. Your receipts can make it easy to go back and check your numbers if they aren’t adding up for some reason, and if you ever get audited, you may need to provide proof of your purchases — especially any items you have claimed as deductions. Make it a rule to keep every single receipt.
Avoid using credit cards
While it can be extremely handy to use a credit card to cover an unexpected expense once in awhile, as much as possible you should avoid using credit, because the interest rates will almost always be extremely high. If you do have to buy anything on credit, make sure you pay it off as soon as you can, as this will save you money on interest as well as do wonders to help strengthen your credit rating.
Don’t borrow more than you can repay
Sometimes getting short-term loans can be a smart financial move, but one of the most important basics of budgeting is to never borrow more money than you can afford to repay. Apart from the fact you will cost yourself more money in interest each time you miss a repayment, if you miss very many repayments you risk repossession of that item for which you borrowed the money. Before you even look into cash loans, carefully consider what you can reasonably afford in repayments, and under no circumstances borrow more money than you can afford to pay back.
Save for a rainy day
One of the most important budgeting basics is to put any extra money you can aside for a rainy day, because as much fun as it can be to be frivolous with your money, if your cash flow starts to dry up you may find yourself really needing any extra money you can get. Whether you put aside 10 per cent of your pay each week into your savings or you stuff a piggy bank with your spare change, make sure you put at least some money aside for a rainy day.