Following a budget can help ensure financial security for you and your loved ones and, not to mention, allow you to sleep a little better.

Budgeting matters when making thoughtful financial decisions. With sound personal finance in Malaysia becoming more relevant in view of a possible recession looming on the horizon, it might matter even more.

People who lose sleep over money are likely letting their money control them (instead of the other way round). Try and take steps to regain control of the situation.

When you budget your money effectively, things can run on autopilot according to a set plan (for the most part) instead of leading your around by the nose.

In that way, a budget can contribute to financial stability. Stability and consistency can lead to order and much peace of mind. A budget makes it simpler to pay bills on time, develop an emergency fund, and save for significant purchases like a car or home by tracking costs and sticking to a plan.

Overall, a budget puts a person on a better financial footing in the short and long term.

Create A Realistic Budget Plan

Your net income is the foundation of a successful budget. That is your take-home pay (your total income or salary) minus tax deductions and employer-provided benefits like retirement plans and health insurance.

Focusing on your total compensation rather than your net income may lead to overspending because you believe you have more money available than you actually do have.

If you operate as a freelancer, gig worker, contractor, or are self-employed, keep accurate records of your contracts and payments to help you handle irregular revenue.

Make a list of your short-and long-term financial goals before you begin combing through the data you’ve collected. Short-term goals should be completed within one to three years and may include things like putting up an emergency fund or paying off credit card debt.

Long-term objectives, like saving for retirement or your child’s education, might take decades to achieve. Remember that your goals do not have to be etched in stone, but knowing what they are can help drive you to stick to your budget. For example, if you know you’re saving for a vacation, it may be easier to cut back on spending.

Use the variable and fixed expenses you accumulated to estimate how much you might spend in the following months. After that, compare it to your net income and priorities. Consider establishing clear (and reasonable) spending limitations for each category of expenses.

You may wish to further divide your expenses into things you must have and those you desire to have.

For example:

  • If you drive to work every day, petrol is considered a necessity.
  • A monthly audio streaming service membership, on the other hand, may be considered a want.

This distinction is significant when you’re looking for ways to channel money toward your financial goals.

Always Track Your Expenses

Tracking and classifying your expenses can help you figure out where you’re spending the most money and where you might be able to save the most.

Begin by making a list of your fixed expenses. These include monthly bills such as rent or mortgage payments, utilities, and car payments.

Next, tally up the costs that may fluctuate from month to month, like food, transportation, and entertainment.

This is an area where you may be able to save money. Credit cards and bank statements are excellent places to start because they frequently itemise or categorise your monthly expenses.

Expensive Is Not Always Better – Look For Cheaper Alternatives

When we make a purchase, price is nearly usually the most essential factor. An item may have to fit within a specific budget, and occasionally we might rather not spend the money if we don’t feel obligated to.

However, focusing primarily on price and selecting the less expensive item can have unintended consequences.

Choosing the cheapest option all the time not only costs you more money in the long term but also lowers the quality of a product or service and decreases its worth over time.

Paying attention to quality (or the value you’re getting) instead of price may always be the more sustainable option since it reduces waste, increases efficiency, and supports businesses that love their customers. Investing in a quality product saves money because it must be replaced less frequently, and emphasising quality also supports corporate social responsibility activities.

Price has a part to play in purchasing decisions, but it should not be the only one. Price and sustainability (or how long something lasts) are inextricably linked, and choices in one have an impact on the other.

Pay With Cash

It’s a concept known as “pain of paying” in behavioural economics — because humans are loss-averse, spending money is painful. When you pay with a credit card, though, the agony is deferred until later. However, with cash, the agony of parting with one’s money is felt immediately, with varying levels of agony when paying in cash.

However, because dealing with cash involves a higher tactile component than using a credit card, it is simpler to remember what was spent.

Cash can be more difficult to spend owing to our emotional commitment to hanging onto our money. If you don’t work in a cash-intensive field, making regular withdrawals for your spending money will almost certainly necessitate travelling out of your way to find an ATM.

However, in this case, inconvenience is preferable to no inconvenience. After all, it adds another element of actual sacrifice to spending money: if you have to work so hard to get it, you may be less likely to waste it.

Watch What You Eat

After a hard day at work, it might be difficult to find the energy to prepare a meal. Begin by cooking at least twice a week if you eat out frequently, and gradually go to three or four times a week.

If that’s not possible, set aside some time on Sunday to meal prep a couple of quick dinners for the week. This way, when you get home from work, you’ll have a meal ready to go.

The same is true with coffee. Buying coffee every day may appear to be a minor expense, but it could quickly drain your bank account. Cutting off this one minor expense can result in hundreds, if not thousands, of dollars saved each year.

Cooking at home can be less expensive than eating out. In most cases, feeding a family of four costs the same as eating out for one or two people. So, instead of eating out at the last minute, make it a practice to cook at home.

Some people prefer to cook for the full week on weekends, whereas others cook one meal per day. One more advantage of home cooking is that you can control the quality of the ingredients you use.

Conclusion

Being on a tight budget can sometimes affect a person in different ways, and not just financially. Being in the correct mental state and preparedness can help in the long run, making a stressful situation more palpable.

 

Have you ever been on a shoestring budget before? Let us know in the comments down below.