When it comes to making financial decisions, budgeting is crucial. A budget makes it easier to pay bills on time, develop an emergency fund, and save for significant purchases such as a car or home.

In short, planning your finances puts you on better footing in the long and short term. Here are four tips to help you get the most of your budget.

1. Create a realistic budget plan

Your net income is the foundation of a successful budget. Focusing on your total compensation rather than your take-home pay may lead to overspending as you might believe you have more money than you actually do.

If you operate as a freelancer, gig worker or contractor, or are self-employed, keep accurate records of your contracts and payments to help you handle irregular revenue.

Make a list of short- and long-term financial goals. Short-term goals should be completed within one to three years, and may include things like creating an emergency fund or paying off credit-card debt.

Long-term objectives, like saving for retirement or your child’s education, might take decades to achieve. Remember that your goals do not have to be etched in stone, but knowing what they are can help you to stick to your budget.

2. Track your expenses

Tracking and classifying your expenses can help you figure out where you’re spending the most money and where you might be able to save.

Begin by making a list of your fixed expenses. These include monthly bills such as rent or mortgage payments, utilities, and car payments.

Next, tally up the costs that may fluctuate from month to month, like food, transportation, and entertainment.

Determine your variable and fixed expenses so you can estimate how much you might spend in the following months. After that, compare it to your net income and priorities. Consider establishing clear and reasonable spending limits for each category of expenses.

You may wish to further divide your expenses into things you must have and that you desire. For example, if you drive daily, petrol and car maintenance may be considered a necessity. But do you absolutely need your audio-streaming subscription or expensive gourmet coffee?

Credit card and bank statements can be helpful as they itemise or categorise your expenses. Alternatively, money-tracking applications can help you stay on top of your spending.

3. Watch what you eat

Cooking at home is usually less expensive than eating out, and eating out for one or two people could cost the same as feeding a family of four. So, instead of heading to a nearby establishment when makan time rolls around, why not make it a practice to cook at home?

Of course, it’s understandable that after a hard day’s work, you might not have the energy to prepare a meal. Start small by cooking once or twice a week, and gradually increase the frequency.

If this is not possible, set aside some time on the weekend to prepare meals for the week. As a bonus, you also get to decide on what quality ingredients to use.

Also watch your spending if you are a coffee lover. Going back to the previous point: buying coffee every day may appear to be a minor expense, but it could quickly drain your bank account. Cutting off or at least adjusting this one expense could result in hundreds – if not thousands – of ringgit saved a year.

4. Use cash

Whenever possible, use cash instead of credit or even debit cards. While there is certainly greater convenience with being able to simply tap or wave your plastic, the physical nature of having cash in hand allows you to better keep track of how much is being spent.

Making regular withdrawals of your money will almost certainly necessitate travelling out of your way to find an ATM. However, this inconvenience could be an advantage: if you have to work so hard to get it, you might be less likely to waste it.

5. Weigh the alternatives

Price is usually the key thing people look out for when they make a purchase. However, focusing primarily on price and opting for the less-expensive item can have unintended consequences.

Choosing the cheapest option could cost you more in the long term, as it could imply the product or service is of lower quality and decreases in worth over time.

Paying attention to quality or value, rather than price, could be the more sustainable option as a good and dependable product needs to be replaced less frequently.

When it comes to services, consider whether it’s worth paying a bit more if it means you receive quality service and are supporting local businesses.

This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.