If you’re feeling like you’re not good enough at handling money, it might be time for you to start analyzing your budget. When you’re struggling to save money and pay your debts, you’re probably not doing budgeting as it’s supposed to be done.
Analyzing your budget every month allows you to be aware of your finances, which makes you on top of them. Instead of just spending money without doing a budget analysis, you should be more aware of your spending.
In this article, we will learn some basic things to keep in mind when you want to start budgeting. Learn how to analyze your budget to make sure it’s optimal!
Actual Spending Vs. Planned Spending
Using a budget spreadsheet, start keeping track of your spending. After establishing your budget, you should compare your actual spending with your planned spending. Ideally, you’ll be tracking your spending daily using the spreadsheet.
Your goal is to spend the amount that you planned to spend, not more. In case you spend more than you planned, the spreadsheet will help you see where you spend money that could’ve been saved. If you’re planning to save money, you should use the spreadsheet to help you decide which areas of your spending can be trimmed.
Keep Track of your Financial Goals
When you set any sort of financial goals, keeping track of them always comes in handy. One of the most important financial goals is to set a significant amount of money aside as an emergency fund. Having a relatively big emergency fund will allow you to be less stressed out about your budget when you face any sort of economic difficulties.
Other financial goals can be related to paying off debt, leisure-time money, and saving for things that you desire. You should keep track of your finances every month to see if you’re progressing towards them as you should, or you must make some changes in your spending habits.
Be Awry of Financial Leaks
Financial leaks are often related to poor spending habits. If you’re facing the same issues every month with financial leaks, you should be more in control over your pocket. One of the major causes of financial leaks is relying on your credit card more often. You should try to limit your credit card spending to avoid extra expenses.
Review your Annual Spending
Long-term budget optimization requires long-term analysis. You should keep track of your annual spending to see the bigger picture. You might notice spikes in your spending habits during certain seasons.
For example, if you’re the type of person who uses drugs and likes to party during some times of the year, you might notice that you spend more than you can handle. Reviewing your annual spending will allow you to adjust your budget to cover the seasons of fluctuation.
Allocating funds allows you to be faithful to your planned spending. When you only spend the money you allocate for your different spending categories, you become more strict with yourself. Each month, you should set allocation funds for certain spending categories. Once established those funds, you must stick to only the budget that’s allocated to each spending category.
You should also allocate a certain amount of money each month to a small emergency fund. If you end up not spending that money on anything, it should be split between your big emergency fund and your long-term savings.
Suppose you’re planning to get married or have a baby, you should add an additional allocation fund to help you cover the extra expenses. You should also allocate a fund without any purpose just in case anything pops out unexpectedly that will require extra money.
Analyze your Lifestyle
Any change in your lifestyle can either trigger an increase or a decrease in your allocated monthly budget. Ideally, you want to have a healthy lifestyle that doesn’t compromise your pocket.
If any aspect of your lifestyle that you can dispense with makes it hard to keep up with your set budget, you should aim to change that. On the flip side, lifestyle choices that optimize your budget should be fostered and increased.
When you’re fully in control over your finances, nothing can stop you from finding the optimal lifestyle that will allow you to live according to your budget and save money at the same time.
Many poor financial choices we make tend to go overlooked, which is why analyzing your budget is a wise move.