Tax Tip Thursday

Last week, we talked about the 6 Steps to Successful Budgeting. So, now that you’ve got a good budget, how do you use it?

Recap

As I said last week, a couple of secrets to making a budget and making it work are:

1. Having a goal, and
2. Making it realistic.

Once you’ve done that, the key is to execute. Here are some ways that can help! You don’t need to do them all — just pick the ones that appeal to you. Whichever ones you choose, you just have to find a way to make it work for you.

1. Goals

Have a goal. Budgeting for the sake of budgeting is well and good, but having a goal can really help you keep yourself motivated. Make sure you write down the goal! Maybe draw a picture or cut a picture out of a magazine and put it somewhere that you’ll see it every day. It sounds cheesy, but you might find that it helps keep you motivated.

If the goal is specific (as it should be), be sure to quantify it by writing down the total amount that you need to save.

2. Break it Into Smaller Pieces

If you’re having trouble managing monthly goals, try breaking it into weekly or even daily goals as it fits your habit. Maybe the task of only spending $100 on coffee in a month is difficult to stay on top of. They’re not very expensive to buy, and it’s tough to keep track of it over the course of the month. Instead, try focusing on a weekly or even daily goal for it. $100/mo for coffee is the same as $25/week or $3.33/day. That’s a bit easier to keep track of, right?

You can apply the same technique to any category you choose. It’s most effective when used on things you purchase often for small portions of their total budget.

3. Limit Yourself to One Spending Source

There are lots of ways to do this and you can choose any source, but it can be hard to keep track of your spending if it’s spread out between cash, debit, and a couple of credit cards. It’s much easier to watch if it’s all in one place, right? Consider designating one specific way of spending money. If you’re going to buy something, make sure you only ever use the same thing. It doesn’t matter which you choose! Then, leave all the other sources at home. You can’t use the credit card if it’s not with you, right?

This method works nicely with the previous one, too. It’s a lot easier to stay on top of your daily coffee budget if you only have to look in one place rather than three to see how you’re doing!

4. Review and Stick to the Budget!

Now that you’ve got your budget divided up into daily limits and you’re only using one payment method, review it before you leave the house for the day. Write down your limits for the day, and stick to them! If your budget says you can only spend $10 on lunch, don’t splurge. Just keep it to $10.

5. Pay Your Bills When You Get Them

Why wait? What are you gaining by leaving the bill sitting on the counter for two weeks until its due date? The amount payable isn’t going to change, and you’re just risking forgetting about it and owing late fees. Pay the bill as soon as you see it so that it’s out of the way! The money is spent so you can’t accidentally spend it elsewhere, the bill is paid, and you can have one fewer things to remember in the future.

On top of that, some bills even offer discounts if you pay them early!

6. Plan Your Shopping Before You Go

This one can be a real killer. Have you ever gone grocery shopping without a list and while hungry? I’m sure you ended up spending way more than you needed to and bought a bunch of food that you didn’t really need. Plan out your meals for the week, then make a list of what you need to buy in order to carry out this plan. Double check it to make sure it’s complete, and buy nothing else! You might be surprised at how much you save by doing it this way.

7. Use Automatic Transfers for Saving

This is kind of like number 5, where I suggested paying your bills as soon as they come in. Only with savings! It shouldn’t be too difficult to get your bank account set up to automatically transfer a set amount of money to your savings account on a specific day of the month. Let’s say you want to save $500 monthly and get paid twice a month. You could set up an automatic transfer that moves $250 from your chequing account to your savings account the day after your cheque comes in each time! This way, you never even see the money before it’s safe. It won’t be some tempting to spend, and you won’t accidentally forget to transfer it.

8. Tell Someone About Your Budget

I mentioned this one last week. It really works! Just the act of talking about being on a budget can make you feel a little bit more accountability than you may have felt before. Now, if you don’t stick to it, you are going to feel as though you owe someone an explanation, or perhaps that you are all talk, no walk.

If you have a partner or spouse, they could potentially be the best answer. Work on it together! Tread lightly, though. Finances can be stressful to discuss.

9. Review Your Results

Keep track of how you’re doing. And be honest! We all slip up. There will be months where you don’t do as well as you meant to. But, there will also be great months where you save more than your goal! Add a column to your spreadsheet each month so you can see your progress. Track the savings, too!

Do You Have Any Other Tips?

These are some of my favourite suggestions for keeping to a budget, but they are by no means the only ways to do it. Lots of people have their own methods that work! If you have some you’d like to add, please feel free to share. Give us a call or Book an appointment today to tell us what you think!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.