Savings & Budgeting Tips From A Bankruptcy Trustee

Living on a budget is often seen as a bad thing. People wrongly believe that only those who struggle to make ends meet save money and live on a budget, when in fact budgeting represents the foundation of every financial plan. 

Simply put, budgeting means finding the best way to distribute the money you make so you can take small but consistent steps toward achieving your financial goals. Saving and budgeting can help you get out of debt, pay for your children’s college, invest in a retiring fund, buy new things, and more. 

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Without further ado, let’s go over some saving and budgeting tips that could help you achieve your financial goals. 

5 Basic Budgeting Tips 

  1. Know Your Expenses 

You can’t come up with a budget if you don’t know how much you spend every month. So the first thing you should do when creating a budget is writing down all your expenses. You should write down all your calculations or estimates on a piece of paper or a phone app. It doesn’t really matter what you use as long as you can adjust the numbers as you go. 

Start by calculating your recurring expenses – mortgage or rent payments, utility bills, insurance costs, student loans, alimony or child care, etc. Next, you should calculate or estimate how much you spend on groceries. You can use store receipts to get an idea of how much you spend on food, cleaning items, etc. 

Now that you know how much you spend on groceries, it’s time to calculate how much money goes into leisure activities such as gym memberships, going to the movies, yoga classes, eating out, etc. The amount you spend on these activities is usually more difficult to calculate, but you should be able to get a rough estimate of how much you spend on these activities every month. 

  1. Allocate Funds 

Once you calculate or estimate how much you spend on a monthly basis, you should start allocating funds to your expenses. Start by allocating funds to your recurring expenses. Since these expenses cover things like mortgages and utility bills, paying them means ensuring that you and your family will be comfortable. 

Next, you should distribute some funds toward your grocery spending. When it comes to groceries, it’s always a good idea to leave some room for error, especially when you’re just starting out. Even if you’re careful when calculating your grocery budget, you might still forget to include things like spices, garbage bags, new toothbrushes, etc, from time to time. 

Now it’s time to allocate funds to your leisure activities. You should start by paying off your memberships. Next, you should give yourself an allowance for all the other activities you do in a month. You should base your allowance on your previous estimate, but you shouldn’t exceed it. 

  1. Review And Adjust 

You should review and adjust your budget at least once per month. You might miss something when creating a budget, or you might overestimate the cost of some things, so you should constantly review your budget to reflect your real spending. 

As a rule of thumb, if you ever need to reduce some budgets, you should start by redistributing the funds you allocated to your leisure activities. You should never cut the budget you set for your recurring expenses because that could lead to financial problems in the future. 

  1. Unexpected Expenses and Emergency Fund 

If your budget allows it, you should leave some money to spare in case you have unexpected expenses. Some of the most common things people don’t include in their budgets are gifts, haircuts, pet care, and gardening supplies. 

You should also create an emergency fund to make sure that you and your family can quickly access some funds in the case of an emergency. 

  1. Saving And Budgeting Are Habits 

Saving and budgeting are habits, much like sleeping more than 7 hours per night or eating healthy. You can’t develop habits overnight, but the secret is not giving up on your first try. 

And the truth is that most people fail their first and second budgets. It takes about three or four months to get a good grasp on how to handle your finances. So make sure you don’t quit. 

6 Tips To Avoid Financial Disasters 

  1. Follow A Budget 

Use the steps in the previous section to create a budget and follow it to achieve your financial goals. 

  1. Pay Your Bills And Taxes On Time 

Unpaid bills accumulate late fees, so not paying them on time will only increase your debt. Not paying your bills on time will also affect your credit score, which means banks and other lenders will charge more interest on future loans. 

And you should always file and pay your taxes on time. If you don’t file your taxes on time, the CRA may seize your bank accounts, garnish your wages, and may even register a lien on your home. 

  1. Pay Your Credit Card Debt And Payday Loans 

Leaving a balance on your credit card will cost you in the form of interest and will negatively impact your credit score, which can also lead to higher interest rates on future loans. So make sure you pay off your credit card debt every month. 

Payday loans charge fees that are higher than the interest rates of every other type of credit, so make sure you repay them as soon as possible. The added fees can make it difficult to pay off your loan after the first month. 

  1. Sign A Prenup Or Cohabitation Agreement 

Divorce is one of the most common reasons for insolvency. Talking about finances with your partner might be uncomfortable, but the truth is that signing a prenup or a cohabitation agreement can guarantee that both of you are treated fairly in case of separation or divorce. 

  1. Have Life Insurance 

Life insurance may help your family after your death. Having insurance can help replace your income so your family maintains its standard of living, help your family pay for the funeral expenses, and pay off any debts you might have accumulated during your lifetime. 

  1. Understand Your Personal Liabilities When Running A Business 

You might think that registering your company as a corporation protects you against possible claims made by litigators or creditors. But the truth is that this protection doesn’t always apply. 

Creditors, landlords, and suppliers often ask for personal guarantees before doing business. And as a company director, you are personally liable for wages, payroll deductions and vacation pay owing to your employees, as well as CPP employer contributions. You’re responsible for all the liabilities incurred during your time as a director.  

6 Tips For Budgeting Expensive Items 

It’s difficult to buy something expensive like college, cars, and houses without saving some money. Here are some tips that could help you save more, faster. 

  1. Adopt A Saving Mindset 

Saving is a mindset that you should follow at all times. Having a smart money management system can help you build a healthy relationship with money and may lead to a successful financial future. 

Saving and budgeting require discipline, but it can also be very satisfying. Knowing that every dollar you save brings you closer to a new car, a new home, or a comfortable retirement can improve your mood throughout the day. 

Learning how to manage your money better and how to make responsible financial decisions can bring you closer to your financial goals. 

  1. Give Your Savings A Purpose

You should give your savings a purpose to increase your chances of sticking to a budget. For example, you shouldn’t save money for a car. You should save money for that 2018 grey Honda Civic you had your eyes on. 

Knowing what you’re saving for can help you be consistent and increase the amount of money you save on a daily basis. 

  1. Open Different Saving Accounts 

It’s a good idea to open different savings accounts when you have multiple saving goals. Let’s say that you’re saving for a new car and a new house. If you don’t open separate saving accounts for these goals, you risk spending more on the car than you planned, which could harm your long-term goals. 

  1. Open An RESP 

Going to college is expensive and only one-third of graduates manage to pay off their student loans within three years of graduation. So if you want to help your children with that financial burden, you should open an RESP as soon as possible. 

  1. Save More When Buying Expensive Items 

It’s always recommended to offer a large down payment when buying expensive items such as cars and houses. Paying a large down payment means that your total costs will be smaller and that your monthly premiums will be more affordable. 

Having more money at your disposal also gives you negotiating power because you can negotiate with multiple lenders to find the best offer for your needs.

  1. Do Your Research When Buying A Car 

Buying a brand new car is not the best financial decision you can make. Cars lose up to 30 percent of their value in the first year and 60 percent of their value within five years. 

You should research different purchase plans when buying a car because you might be able to secure some great offers. Dealerships often offer great deals on leases, while some might even offer 0% interest car financing for certain models. 

Saving And Budgeting Help You Reach Your Goals 

Saving and budgeting can help you reach your financial goals without restricting your activities or eliminating the fun in your life. When you learn how to properly distribute your funds, you can do whatever you want without worrying about overdue bills or unfiled taxes. 
And if saving doesn’t help you pay off your debts, you can always contact a Bankruptcy Trustee for a free financial consultation.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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