Budgeting means putting together a detailed plan of how much money you
make (income) and how much you spend (expenses).
This will help you in knowing
your financial status, as you can work out how much you are left with after all
the fixed monthly instalments are paid.
Whatever is left over should be saved
towards a goal.
There are some key steps to consider when tackling your budget:
Importance of prioritising
expenses
When drawing up your budget make sure your top priorities are listed
first.
Top priorities on any expense list are food and shelter – this could
include your rent and levy or bond repayment.
The next in line are essential
utilities like water, electricity and transport.
Insurance policies such as life cover, funeral cover and society scheme
contributions should be accounted for too.
Savings should also be a key consideration. It is worthwhile determining
how much you are able to put away and allocate a fixed amount every month.
Once the budget is drawn up
it is important to stick to it by:
- Planning
for financial emergencies
- Allowing
yourself to budget for things you love to do
- Setting
financial goals
- Controlling
spending
Plan for Financial Emergencies
It is almost impossible to plan for
emergencies, however a savings fund towards these is ideal to cover any
unexpected expenses.
Getting life and funeral cover will also be a good
idea to ensuring you and your loved ones are covered.
Budget for the things you love to do
The rule of thumb of someone who
handles money wisely is, don’t spend money you do not have. The key to
budgeting is planning ahead and saving where possible.
You work hard for your money, so
you deserve to spend it on the things you love and enjoy like a holiday, a
deposit towards a car, etc.
Instead of taking out loans to fund the things you
want, rather save throughout the year as this will enable you to enjoy what you
love with peace of mind and without having to incur extra debt.
Setting Financial Goals
Setting financial goals is an important step in
protecting your family's future. Whether you want to save money for your
child's education, a new appliance, or your retirement, set realistic goals and
stick to them.
It is always better to save than to go into credit, as credit is
expensive. Remember to control your spending by paying for your basic need
expenses before you spend on luxuries.
Saving and putting money aside for these
specific goals will ease financial pressure.
Controlling your spending
There are some handy tips to keeping you on
track with your budget:
Ditch the denial
The best advice is to ask yourself "what and if there is anything or
anyone influencing your money spend" and deciding on the best way to use your
cash.
Weigh up your income versus your expenses and ensure that money spent
does not exceed money received.
Even though obstacles such as not saving and
taking on too much debt prevents us from building wealth, the little things we
do on a daily basis, such as buying things we are not able to afford, has an
impact on our finances.
Keep
a daily log of everything you spend
This will help you identify your spending habits and give you a proper idea of
areas where you can save.
Pay
your debt smartly
Many
people do not understand that being in debt has two costs, the amount of
interest you pay each month and the lost opportunity cost of not saving that
money.
By making small adjustments to your budgets and pouring any extra money
into your debt to settle it faster, you can maximise windfalls and make your
money work so much harder.
Once your debt is under control and you have a
savings plan in place, you are well on your way to building some significant
wealth.
Distinguish between wants and needs
Be honest and make a list of your expenses
with the necessary items high on the list and the luxuries at the bottom.
And
when your budget runs out before getting to the luxuries, it is better not to
purchase these luxuries on credit but rather go without or save up for them.
Scale
down
If
your expenses exceed your income every month, try to see where it is possible
to cut on unnecessary spend.
Update
your budget regularly
Your
finances are affected by many things such as the economy, interest, an annual
increase in your salary or unforeseen circumstances such as an emergency, which
all affect your financial situation.
The key is to try save a little bit extra
every month so that you don’t impact your pocket. It is wise to update your
budget and mindset accordingly.
Stick to it
Much like a diet, a budget only works if you stick to it. Sure, you can fall
off the wagon every now and then, but it is important to get back on it!
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