*** The more defined the boundaries, the easier it is to stay within them...

*** 5 more ways to keep your budget on track this year...

*** The key is to stay focused, balanced and good to yourself… and more...

From the pen of Karin Iten...

Dear Investment Academy reader,

On Friday, I introduced you to a plan to help you stick within the realms of your budget this year. This 10-step plan is so simple, you’ll be able to put almost all of it into practice within the first month.

Remember, January is the month where you should reassess your financial situation and alter your spending habits. But don’t despair; scientists say that it only takes 21 days of recurring action before a task becomes a habit. So, if you start today, by early February you may never need to worry about overspending your budget again.

If you missed Friday’s issue of Investment Academy, here’s a quick recap of the first five steps in this plan:

Tip #1: Focus on your savings
Tip #2: Carry cash for those “luxury” buys
Tip #3: Cut out bad habits
Tip #4: Share the responsibility of sticking to the budget
Tip #5: Pay down your debt

My top 10 tips for staying on budget continued…

Now let’s get into the final five tips that’ll keep you and your budget on the straight and narrow…

Tip #6: Keep your receipts

In order to draw up a reasonable (and attainable) budget, you need to monitor your expenses over a few months and average your costs out over this period. Most of us are really good at doing this. But once the budget’s drawn, we simply stop looking at our spending in such detail.

This is a big mistake!

Keeping track of every day spending can really help you stick to the amount you’ve allotted to a specific part of your budget. An easy way to keep tabs on this is to save your receipts and write down what you’re spending at the end of every month. You’ll be surprised how much cash has actually passed through your hands.

Tip #7: Analyse your spending

My next tip goes hand in hand with the previous one. Once you’ve got a handle on keeping your receipts and writing down what you’re spending, your next job is to decide where you can cut back.

A spending diary will help you with this. For instance, you’ll discover just how much you’re spending on eating lunch out every day. If you cut back eating out (or ordering in) to just once a week and bring lunch from home instead, you’ll see a remarkable difference in your savings as early as the first week.

Tip #8: Find a balance

I remember watching my mom when I was little sitting at the kitchen table calculator in hand and balancing the family cheque book. Those weren't the best days in our house I can assure you – there was a lot of negative energy floating around the kitchen for a few hours afterwards.

These days, it’s gotten even harder. Sure, the wonders of internet banking mean we (hopefully) never have to go to the bank again to get a statement for our accounts. But, it also means that it’s easier to pay something off without sticking to your budget.

One simple mistake could lead to overdraft charges and insufficient funds in your account. So print out a statement and balance up every month to ensure you always stay in the black.

Tip #9: Set up a special account

Now that you’re saving all this extra money (from cutting back on costs) allocate these funds into a special account with an early withdrawal penalty or one with a fixed timeframe for how long the money needs to be in the account. This way, you won’t be tempted to draw any of it unless you absolutely have to.

Tip #10: Be flexible

Remember, life is unpredictable so be kind to yourself. Things happen that are out of your control, so try and allow for this in your budget.

If something comes up that you haven’t planned for, don’t let it bug you. Simply do the best you can and get back on the horse again next month. Trust me, it’s a lot harder to get back on track if you don’t let yourself get frustrated over a mistake or two.

There you have it, my top ten tips for staying on budget. I’ll be with you again next Monday, but stay tuned for some investment know-how from Aiden on Wednesday and Julie’s first issue of the year on Friday.

Till then...

Happy investing,

Karin Iten
For the Investment Academy