We’ve all been told that the best path to achieving your financial goals is through setting a budget. But, can we agree that no one reminds us, mentions in passing or teaches us how to audit the same budgets we make? Well, that ends today.
In this article, we look at how you can prioritize your expenses and only the expenses that bring real value to your life. While budgeting remains a powerful financial management tool for individuals, corporations, and governments, we don’t pay enough attention to prioritizing expenses.
Priotirizing your expenses is one of the most important things that need to be carried out to ensure that you have all of your finances in place. It can also help you to recognize how much money you have available to you for other areas. As an individual this is crucial, but it is also just as important for a business to carry out and update its expenses too. It is now easier than ever for employees to include their expenses as they can do so on certain types of Expense Management Software that their business can incorporate. This can be particularly beneficial if you have completed overtime or have been required to attend a business trip that you need to receive expenses back for. You can even do it from your own phone so there should be no excuses for you to not sort out your expenses; individually or business-wise.
Here are some of the budget-auditing tips:
Ask yourself whether the expense sparks joy or not
For you to even get here, you have to consider a financial decluttering sit-down with your bank statements and the credit card statements. Sit and go through your statements slowly, asking yourself whether the items you purchased brought real joy and value to your life or not. Make sure you focus on all the basic expenses, as well as every other expense you think of as non-essential.
When you employ this approach to your expenses every time you receive your bank statement or your credit card bill, you will learn to avoid and cut out unnecessary expenses from your budget. In this decluttering process, your aim is to provide a resounding YES to purchase. Otherwise, you should purge that expense from your budget.
Paying Yourself First
This is something we forget a lot. When it comes to a budget audit, you should first look at your expenses and how much you’ve saved. Regardless of your income, you must put aside something for the future. The young and restless will argue that you only live once and that you should make the most of today because you might not live to see tomorrow. But what happens when you do? What happens when you live to reach 90 years?
So, save and make it a habit to pay yourself first. By paying yourself first, we mean that you should contribute to your 401(k) account, pension, or any other retirement plan to ensure that you have a padded future.
Since you don’t want to miss a month’s savings, set up automated payment systems to ensure that you always save, you should do this with your emergency fund too. Once you have these payments taken care of, you can use what is left to cover all your other expenses.
Keep in mind that saving or reinvesting in your lifetime capital gains exemption is something that your future self will thank you for doing.
What is your routine like?
Are you unable to determine which treats and splurges are really worth your money, look back at your routine and make sure it’s as minimal and as inexpensive as possible? So, if you find that you indulge in something too much, look into it and determine if it’s worth it or not.
Ask yourself if that expense made your life better
It’s human nature to buy things because we think that they will make us happier or better. But when you look back at your purchases today, what value do they bring to your life today? What is the value of that item in the long term? An expense that doesn’t add value to your life in the long-term is non-essential and should not be budgeted for.