When an individual/household is faced with savings constraints, necessary means must be satisfied to adjust and prepare for the future.
Saving is the process of forgoing present consumption for future consumption or another expenditure purpose. But what happens when you are faced with a tight budget, how do you save enough. Though savings is a leakage to present consumption pattern, it is also an injection into future income.
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What is a budget?
What is budgeting?
The budget is an estimation of expenditure and revenue over a period of time. It’s a spending plan usually compiled and estimated over time either monthly, quarterly, or annually.
Budgeting on the other hand refers to the process in which individuals/households or corporate individuals create a detailed plan on estimated income and how to spend such income.
Budgeting is used to determine household or individuals essential expenses, income (after tax), financial priorities, and lifestyle expenses.
Why do you need a budget?
Tracking your revenue and expenses gives you a strong insight into where you make money and where the money goes.
Once you have a budget, it allows you to create a spending plan and spend on things that are more important, keep you out of incurring future debts, help you work out appropriate means of paying off existing debts, analyzing your income, and having decent savings.
A budget allows you to measure and review your spending patterns & allow your financial priorities to control spending impulse. How do you set your spending plan?
Have an organize financial priority
Identify all sources and amount of income
Set your expenditure
Calculate your budget
Record all your transactions
Set goals and make adjustments when necessary
But what happens when you are on a tight budget, how do you save more money. It is not easy to save when challenged with a tight budget, but it is advisable to save little for unforeseen circumstances.
Now to the question, how to save money on a budget? Savings is necessary as it allows individuals/household to cater for emergency purpose, retirement, college, debt payoff, rent, and provide you with a sense of financial freedom. Below are some ways to save money when you are on a tight budget.
One of the smartest ways of saving more is to reduce your cable tv expenses or switch to a cheaper tv. Most tv rates have increased in recent years putting more burden on individuals and households.
Switching to cheaper tv or reducing existing tv usage rates will help you save more when faced with a tight budget. There are several online TV with cheaper rates that one can switch to such as Netflix which costs an average of $8.99 per month.
Another easy way to save more is to cut back on your food expenses. Reducing the consumption of junk food or eating inside can increase your savings level.
For instances, an individual consumes soft drink daily at $10, this cost $300 on the budget expenses. Switching to a cheaper soft drink or stopping its daily intake will help save such individuals more money. Another way to cut down on food bills is to buy foodstuffs from supermarkets using coupons.
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Make a record of every expenditure
Estimating all your daily expenses will give you methods of saving more. Recording allows you to review your choices and better means to your preferences.
Taking a look back at your previous expenses gives you an insight into how much you could have saved by cutting down that expenditure.
For instances, a pack cigarette cost about $6 on average, taking a pack daily cost you $180 monthly. Finding alternatives or reducing daily usage will allow you to save more.
Debt repayment is leakage from the income level. Reducing your debts will go a long way in helping you save more when on a tight budget. You should always try as much as possible to avoid high-interest loans and check for debts with longer tenor.
Identify essential and non-essential bills
Essential bills refer to your general household living expenses. They include rent, food bills, utility bills, cable tv, internet bills, and another cost.
Whereas, non-essential bills are expenses on things that you do not basically need but want and most often include where the money is wasted the most.
It includes snacks, candy, gifts, etc. Prioritizing your essential and non-essential bills will allow you to save more from your income.
Cut down on large expenses
Take a look back at your big expenses. Is the vacation that necessary? Can you find a roommate to reduce your rent bills? Or simply cutting down on transport expenses.
These are some ways to reduce your big expenses, and the options are mostly the last resort when trying to save more on a budget.
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Raise your income level
Finding alternative means of generating income will help you increase your savings. Some of which includes freelancing, tutor, guide tourist, investing in capital markets, sell used items, the source for gigs, etc.