The cost of living crisis has brought hard times upon most people. Inflation continues to rise and the cost of energy in particular is sky-high. These circumstances also create a vicious cycle because long term financial goals are often ignored when people are focused on keeping up with everyday costs.
It prompts an important question:
How can you take back control of your own finances in these uncertain times? Let’s take a look at how to plan a budget for the new year.
10 Tips for Economy Budgeting in 2023
Track Every Cent and Write Everything Down
Writing down your goals will increase the chances of you achieving them. You cannot improve what you do not know which emphasises the need to track all income and spending. I like to keep a physical account of everything and budgeting apps such as YNAB are useful for tracking on the go. This record should always be accurate and account for every last cent you earn or spend.
2. Locate Every Cent and Consolidate Finances
A great sense of control can come from locating your finances. This process will help remove uncertainty and give you an accurate assessment of your net worth. Whether this is good or bad, it’s better to be realistic and avoid overestimating this side of your budget. You might also want to consolidate your finances by closing certain accounts and creating a single point of payment for all expenditure. In terms of savings, you can perhaps open a high yield savings account and transfer any excess funds into this new account…
3. Open a High Yield Savings Account
When you set money aside, you want to make this money work for you. Unfortunately, many people miss out because they leave their savings in accounts with low APY (annual percentage yield). Opening a high yield savings account is a safe and secure way to earn better interest on savings. Banks are very competitive at the moment which means it’s easy to shop around and compare numbers to find the best high interest savings account.
4. Start Building an Emergency Fund
In times of uncertainty, you don’t want to be living on the edge. This is even more important when you don’t have a safety net and an emergency fund to be more specific. Unexpected expenses happen all the time and the security of an emergency fund can provide confidence in times of uncertainty. Reports also show how the pandemic ate away at many peoples’ savings and now is the time for building back better.
5. Limit the Luxuries and Cut Back on Spending
The easiest way to save money fast is to cut back on spending. Luxuries are often the main culprits for overspending and many of these expense can be reduced. For instance, this is probably not the time to buy a new car, television or laptop. You might also cut back on nights out and at least try to avoid the most expensive restaurants. It’s up to you whether or not to remove coffee from your daily routine but the general idea here is to trim down your spending.
This includes the following…
6. Switch to a Different Supermarket
Shop around for the best prices for your groceries. You can save hundreds per month from this switch and most supermarkets offer a similar standard of products nowadays. It’s also a good idea to choose a supermarket that offers a loyalty card. These cards can provide rewards and discounts over time. However, try to be careful with buying in bulk because studies suggest
this usually involves spending more for more than you need over long periods.
7. Eliminate Subscriptions and Automatic Payments
It feels as though every app or service these days offers a subscription. It might seem like a cost-effective option and convenient to have these subscriptions, but they are often unnecessary. For example; do you really need Netflix, Disney AND Prime? Many people also go through life without even realising they continue to pay certain subscriptions. Thankfully, it’s easy to locate these automatic payments through your banking or payment apps. You can then decide which subscriptions you can or cannot live without.
8. Change Your Fixed Policies and Haggle
It’s not secret that comparing rates and switching can save you money. This is true about everything from mortgages and insurance policies to energy bills and phone plans. In fact, you might want to begin by getting rid of the cellphone bill and changing to a prepaid plan. This will likely result in a lower monthly fee and at least ensure you know the exact cost each month.
Mortgage and insurance payments are also some of the biggest monthly costs in a budget so even a small reduction can result in big savings. Research also suggests 70%+ of consumers are likely to receive a discount if they haggle. You can do this with any type of bill and it doesn’t cost anything to ask.
9. Pay Closer Attention to Energy Costs
We all know about the rising energy costs in recent times. These prices won’t be returning to reasonable levels any time soon so it’s best to focus on how you can reduce your reliance on these costs. Driving less is an obvious solution and maybe possible if there are public transport options available to you.
You can also save on energy bills at home by heating certain rooms as opposed to heating the entire home. Electric blankets are usually cheaper to run than the heating and it really pays to turn everything off when you go out.
10. Forget the Setbacks and Focus on Consistency
Consistency is the real key to a successful budget. You might fall off course from time to time but consistency will help you get back to where you were. This might refer to saving the same amount each month or avoiding the temptation of luxuries but either way, committing to the plan will help you achieve the end goal. There is also a great power to compounding results and taking small steps every day with the intention of fulfilling a big picture goal.
Summary – Economy Budget 2023
You should always consult a qualified financial advisor for advice on specific savings or investment products. However, the tips above can help you start planning and budgeting to achieve true financial wellness in the long term.
Now; let’s take a quick summary of the points above.
– Buy a journal and download the You Need a Budget (YNAB) app. Commit to recording all income and expenses as soon as they happen.
– Take a realistic approach by recording your precise worth and forecast of expenditure. Consolidate your finances into a smaller number of accounts.
– Open a high yield savings account.
– Start building an emergency fund.
– Write down and record all items on which you will cut back on spending.
– Switch to a different supermarket for cheaper groceries.
– Cancel as many subscriptions as possible.
– Compare monthly plans and policies for better deals.
– Pay more attention to energy related expenses.
– Move past set backs and stay consistent to your budget.