The first step to budgeting is to find out what you need to put aside for your major expenses.
A home is likely one of the most expensive purchases anyone will make in their lifetime. However, the costs of owning a home are more than just the price of the property. For many homeowners, renovation, maintenance, utility bills, furniture and appliances are also major expenses that they need to factor in as well. Monthly budgeting is definitely a skill that most homeowners need to know, and here are some tips and tricks we have to share.
1) Figure out how much you need to set aside each month
It might be difficult to believe, but a number of homeowners that PropertyGuru spoke to do not keep track of their cashflow each month. The first step to budgeting is to find out what you need to put aside for your mortgage, renovation loans and so on, and create separate “buckets” for each item, to make it easier to keep track of. Homeowners should also have a slush fund of at least $10,000 set aside to tackle any ad hoc repairs and maintenance.
2) Set the money aside
Many banks have online tools to help individuals put money aside in separate buckets for different purposes. Homeowners can check with their financial services providers to see if such tools are available. Of course, homeowners can always use the old school “envelope method”. How this works is you write the purpose of the money on the front of the envelope, and set aside the necessary amount of cash in each envelope each month.
3) Keep track of the money going out from each bucket
Every month, do a quick accounting of how much was drawn down from each of your buckets to pay for your homeownership expenses. It would be good to tally with any receipts and invoices, just to make sure that all spending is accounted for. Create a simple spreadsheet to make keeping track easier, and file your receipts and invoices neatly so that you can refer to them when you need to.