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:
- 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
- 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!
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!