Budgeting

Creating a budget might seem like an overwhelming and even impossible task but with these guidelines it will make the task easier. Setting a budget assist with making your money last the whole month, helps with getting you out of debt and makes saving for the future possible. A budget will not increase your income but it will help with seeing what you have available and where that money should be spent first.

There are many important things to keep in mind when setting up a budget. Listed below are important factors that must be incorporate into your budget and failing to do so can cause your personal budget to fail.

• Prioritise expenses.
• Budget practically for every day normal expenses.
• Plan for the unexpected.
• Remember to include quarterly and annual expenses.
• Do not spend more than what you earn.

Start creating a personal budget by listing your expenses and prioritising them. Listed below are examples of the different expenses you need to budget for:

Unexpected expenses

• Home repairs and maintenance
• Medical Bills
• Vehicle repairs

Annual, quarterly expenses

• License renewals
• Insurance
• Professional fees such as accountants, attorneys

Monthly expenses

• Credit Card payments
• Rent or mortgage payments
• Internet Connection
• Telephone and cell phone
• DSTV or other Television connections
• Electricity and water
• Car payments

Weekly expenses

• Child day care
• Groceries
• Clothing and beauty toiletries
• Transportation
• Savings

Discretionary expenses

• Books, magazines
• Entertainment
• Impulse purchases
• Snacks
• Restaurants
• Vacation

How to prioritise expenses:

It is very simply to prioritise expenses when you think about it. At the top is your living expense which is food and shelter. Shelter of which is your rent or mortgage payments. After that are important utilities such as electricity and water. Your car payments and licensing fees is the next important expense to your budget if your car is essential to your job. Home insurance, medical insurance and vehicle insurance should also be a priority on your budget. Other expenses such as Credit Card payments and discretionary expenses are at the bottom of the expense list.

The second step in creating your budget is to list all your income. If you receive any income annually simply divide the amount by 12. Remember to list all income sources such as alimony, child support and side jobs. The total amount will set the limit on your total budget.

When all your expenses are deducted from your income and you have money left over you can allocate that money to a savings account and start saving for that rainy day or that holiday. When your income does not cover all your expenses you need to adjust your expenses and see where expenses can be cut such as that daily chocolate.

How to adjust expenses:

Firstly see if you can cut some of your discretionary spending such as eating out. Try to cut on grocery shopping by buying only what is really needed, try to cut on personal care items or buy generic items and store brands instead of the more expensive brand items. Start a carpool to cut on petrol expenses or other travelling expenses. If the deficit is big then down scaling your car or house might be the best option before your debt becomes unmanageable.

Tips to help you succeed

• Know your financial status
• Face the reality of your spending and let go of the denial
• Keep a daily log of all your spending
• Distinguish between wants and needs
• Pay your debts smartly. You can’t have debt and save at the same time.
• Don’t leave debt until it is too late be pro-active and see a debt counsellor.
• Plan your budget with your partner
• Update your budget regularly
• Scale down on expenses when needed
• Stick to the budget