Budgeting Basics

Written by heeshma

July 9, 2013

Budgeting isn’t a big term for the people who are surviving on tight money. Budgeting is for everyone.

What is budgeting?

Budgeting a process of creating your spending plan. It helps you organise your finances.

Why budgeting is important:

  • Secures your financial future
  • Helps you plan for short to long term expenses
  • Shows you how much money will go out each month and how much you will save
  • Helps keep you out of debt and maintain emergency funds
  • Most importantly, budgeting helps you achieve your goals. You can know how much you have saved, whether it’s enough for your goals and where you can possibly cut down

Creating a budget is easy. The following steps should get you started:

1. Set Goals:

List your:

  • Short term goals
  • Medium term goals
  • Long term goals

Write down the estimated cost for each of these goals and the targeted date

2. Identify your Incomes and Expenses: 

Create a simple worksheet that includes your:

  • Monthly income
  • Estimated living expenses, fixed and variable; examples: monthly house loans/rent, internet, phone, electricity, groceries, fuel, personal expenses, credit card payments, etc

3. Identify your Needs and Wants:

  • Need = something you have to have for survival. Example: food that provides you with the right nutrition
  • Want = something you would like to have, but is not necessary. Example: a double chocolate chip sundae

4. Create your Budget:

  • Understand billing cycles and expenditure patterns
  • Ensure expenses are not more than income
  • Make choices with regards to your needs and wants to cut down your expenses to meet your financial goals
  • Plan what to do with your savings
  • Ensure you have an emergency fund

5. Act:

  • You know what needs to paid for and when
  • You know how much of your expenses you need to cut down
  • You know how much you need to save

It’s now time to put your plan into action!

6. Review:

Monitor, review and re-evaluate your plan to ensure you are on the right track.

You’re now ready to create your first budget today!

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