Your Financial Update #13
Learn how to budget
Separating your wants from your needs and learning how to budget can help you save towards the things you want. Here are your budgeting questions answered.
What is a budget?
A budget is a record of how much money you earn/get in every month and how much you spend every month.
Why should I budget my money?
Without a budget you may find yourself spending more money than you have. You may also find yourself in a tricky situation of not having cash for emergencies. A budget can also help you save towards the things you want.
How do I create a budget?
Follow these steps to creating a budget that works for you:
1. Keep a record of what you spend your money on every month. Use receipts to track your purchases of absolutely everything.
2. List your spending: In a speadsheet create columns for rent, groceries, school fees, cellphone/airtime, transport, electricity, entertainment etc. Next to each line item, include the amount of money you can afford to spend on each category a month.
3. Separate your ‘wants’ from your ‘needs’. A need is something you have to have to survive while a want is something you would like to have. Think of “needs” as essential items like rent, groceries and transport. While “wants” are things like new clothes, your daily cappuccino, concert tickets i.e. things that are nice to have but that you can live without.
4. Include a column for ’emergencies’ or ‘savings’ where you can save a portion of your money each month for unexpected events or something you saving for.
How can I manage my budget?
While sticking to a budget does require discipline, it shouldn’t feel like punishment. Here are some tips on how make your budget work for you:
• Set small goals. Achieving these goals will give you the confidence to set bigger ones. Start by challenging yourself to save a small amount on groceries.
• Get the whole family involved. Make sure everyone understands what you are doing and why you are doing it. This will make it easier and more fun.
• Adjust your budget according to the cost of living. You may have to set aside more money for essentials when prices rise but you can always increase the money you put away for your goals and ‘wants’ when you earn more money.
Becoming budget wise is about putting together a realistic and practical budget you can stick to This will be easier once you understand your ‘wants’ versus your ‘needs’. The more you budget the easier it will get to save your money.