The word ‘budget’ often carries a negative connotation. However, budgeting does not mean depriving yourself of the finer things or becoming a miser. On the contrary, a budget allows you to find the balance and meet your financial obligations and still have money to enjoy life. Regardless of the amount you earn, a budget is simply a guide to ensure that you are making the most of your dollars. So how do you create a budget and stick to it?
The first step is to know what you spend money on. You can choose to do this by one of two approaches: by creating a journal in which you document every purchase you make for a month, be it a pack of gum or a pair of shoes, or by collecting all receipts and bills and averaging how much you spend on each item every month, be it utilities, groceries or debts on which you make monthly instalments.
Next calculate your monthly income. Financial prosperity comes from living within your means. Your monthly expenses should not exceed your monthly income. In the event you are spending more than you earn, don’t be alarmed. This does not mean you’ll have to cut all spending. Regulate your spending habits but still leave room for fun; for example, by reducing the number of times you dine out weekly from every night to once or twice per week.
Finding a balance and figuring out what works for you is what budgeting is about. Instead of setting unrealistic goals try allocating yourself a monthly allowance, withdrawing this amount and spending cash instead of swiping cards. The habit of debits and credit cards, while convenient, tends to give the illusion that you have unlimited funds until you get the bill at the end of the month. Also, bank fees cut into your income without you even noticing.
Prioritise your expenses. When handling your monthly allowance, chances are you won’t be able to have everything you want, but by ranking in the order of importance you can satisfy your needs and by not purchasing those that rank lower you’ll feel less like budgeting is a sacrifice. Alternatively, you can also postpone purchases outside of your budget until you can make allowances for it in next month’s budget.
Refer to your budget throughout the month. It’s not just a theory; for it to work you have to live it. Before making any purchases, refer to your budget. Adjust your budget as it reflects life changes, income and expense changes, or emergencies.
Finally, budgeting, like dieting, is a lifestyle change. In other words, give it a few months and you will see the results. Do not quit simply because you couldn’t stick to the budget in your first month. Keep working and adjusting as needed. Your budget will help you to manage debt, increase your savings and spend more wisely. So see it through and you will see the rewards of budgeting in your financial prosperity.