How a budget can help you reach your savings goals

Have you set your SMART financial goals for the year yet? Budgeting is one of the most effective ways to manage your money and turn your goals into reality.

Five benefits of budgeting

Being in control of your monthly finances can be an incredibly rewarding feeling. Drawing up a budget and sticking to it means you decide beforehand how you spend your money. Here are five benefits you'll experience by following a budget:

1. Budgeting prevents you from overspending. It puts you in control of your money so that you have something to show for the money you spend.

2. It helps you see how you can realistically reach a financial goal, no matter how big or small it is.

3. Working out a budget means you know exactly how much you spend all your different needs. It gives you some certainty in managing your money to get you through the month.

4. It can help you see where you can be flexible with how you spend your money. If you decide to spend more on one need and less on another as the month goes by, that's fine, as long as you don't cut down on saving.

5. It helps you save. As you get used to working with a budget, you could start seeing the amount you can save every month increase.

How budgeting can help you save more money

Changing to a savings mindset means that saving money becomes one of the top priorities in your budget.

When you draw up a budget and compare it to how much you spent in previous months, you'll also see where you can save money or where you could be using it incorrectly. This 'wasted' monthly spend is money that can go towards paying off debt and to increasing savings. Seeing that you actually have more money than you thought is another steps towards helping you reach your savings goal.

Five ways to make and keep to a monthly budget

Spending a little time on your budget upfront can spare you a lot of time stressing about your finances through the month. Use these five tips to make your budget a positive experience:

1. Track your spending for a month. This will show you exactly where your money is going and how even the small amounts you spend add up.

2. Look at three areas of your monthly spending you can improve on. Most of us don't overspend in all categories, but only a few. This could be on cellphone use, clothes we don't need or spending a lot on takeaway foods. Having tracked your spend for a month, these areas will show up. Choose three categories and start monitoring and controlling what you spend there to possibly free some money that you can put towards your savings.

3. Make saving your top priority. Remember your personal goals that you would like to reach? One of the main reasons for your budget is to identify where you can save so that you can put this money towards savings or paying off debt. Set up a recurring monthly transfer to make sure that your allocated savings is automatically transferred to a savings account before you can spend it.

4. Allocate percentages of your income. As a starting point and if you're struggling to decide how much to allow for each budget category, simplify your budget using the 50/20/30 plan:

   • 50% of your income is set aside for necessities
   • 20% for long-term savings
   • 30% for other lifestyle activities.

As soon as you have a track record of your monthly spend, you can decide where you want to spend more or less.

5. Use the Vitality Money Financial Analyser for a simple-real time view of your finances. It helps you set spend alerts, shows you when you're overspending and helps you understand your spending trends across over 160 categories.

Watch this video to see how you can set up a monthly budget using the Vitality Money Financial Analyser:

This article is meant only as information and should not be taken as financial advice. For tailored financial advice, please contact your financial adviser.