Creating a budget is the first step in the journey to becoming financially secure. Eventually, by practising smart money-saving skills, you’ll achieve financial freedom. However, if you’re having trouble sticking to a budget, it’s time to infuse it with more flexibility and seeking budget advice from a financial advisor.
2020 has shown us the importance of financial security, as the pandemic has caused 4 in 10 Aussies to lose income. Many were forced to depend on their savings or even touch their superannuation just to stay afloat. However, you can avoid these situations by managing your money properly by starting a flexi-budget, which is another method of budgeting that has helped many people become money-savvy.
The Advantages of a Flexi-Budget
Many people approach budgets with trepidation because of the rigidity that often comes with them. In fact, most imagine budgets as a spreadsheet with fixed-line items, but that doesn’t mean your budget has to look like this, either. Everyone’s situation is different and changes over time, and having a flexible budget helps you navigate your circumstances as optimally as possible. It also removes the pressure to stick to strict spending limits since your budget must evolve with your situation.
Writing Down Your Budget
To get started on your flexi-budget, the first thing you need to do is to write down your essential expenses. You can use a traditional spreadsheet, a budgeting app, or your favourite pen and paper. Getting the numbers down gives you a concrete picture of how much you need to spend each month, and showing them to your spouse or financial advisor will help you get on the right track towards saving.
Another tip is to collect your statements, bills, and invoices from the last year and then write down each category’s costs. Find the average number to create a log of how much you spend on these services. Be sure to review your expenses against your bills during tax season to ensure that your estimates remain correct.
Reserving Funds for Emergencies
After writing down your budget for your essential expenses, it’s time to allocate funds to your emergency savings, which is where the ‘flexi’ part of your budget comes into the picture. Having an emergency fund will help you take care of unexpected situations that put a dent in your income. As we’ve seen with COVID-19, they can happen at any time and have unprecedented effects, so it’s always important to anticipate sudden costs by squirrelling away money for them. If not, your budget will flip on itself, creating chaos.
You can assign emergency funds for different parts of your life, such as home repairs, living expenses, and anything related to your health. You can also create one for miscellaneous expenses, like birthday presents or special events at your children’s school.
Use the One Number Method
With your emergency funds and essentials taken care of, the rest of your funds will be your ‘one number,’ which you have the freedom to allocate to anything you want. Stick to the one number and spend it on anything you like, whether it’s to pay off debt, invest, save for a vacation, or purchase that expensive item you’ve been eyeing for so long.
This ‘one number’ is where your flexi-budget truly shines since your budgeting from the previous steps allows you to have an allocation of hard-earned income that you can freely spend. It can even go to your ‘fun’ budget, which you can use to reward yourself. It’s essential to have something to look forward to in the short and long term so that budget brings you more feelings of success rather than stress.
Conclusion
Creating a budget doesn’t have to be complicated or anxiety-inducing with a flexible budget. By following our budget advice, you’ll work your way towards becoming financially secure and managing your wealth!
New Wave Advice is a team of the best financial advisors offering financial services on the Gold Coast. We are a forward-thinking financial advice firm, embracing the best technologies available to customise each piece of advice we provide our clients. Get in touch with us today to find out how we can help you!
