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Understanding the 101’s of how to set a budget

4th Feb, 2016

Setting a budget can either be the hardest or the easiest thing you can ever do. It only gets easier when you have made up your mind, set a budget plan and strictly stuck to it. Creating a budget plan will be your first step towards gaining control over your money and life in terms of building your wealth.

To get a good budget in place, here are some items you need to look at:

Your income:

The biggest wealth building tool today is your income. You should be aware of how many sources of income you have, and how much they generate. This enables you to understand your inflow and therefore dictates your expenditure.

Your Expenses:

Do you truly know how much you spend? Let’s face it, most of us have unplanned spending habits that often leave us scratching our heads-maybe this is how many go bald, or is it? Make a list of your regular expenses; bills such as rent, utilities, savings, and of course cash for an emergency kitty.

Remember to factor in how much you spend on entertainment and lunch, as well as shopping for clothes and other personal effects. Try and do your shopping in bulk to save by volume and shop as few times as possible to avoid the temptation of spending on unplanned items. Keep a small kitty for the fun activities such as hanging out with your friends, travel and days when you feel like giving yourself a treat.

Control your Payments:

Did you know that not many people factor in the cost of frequent money transfers? Whether it’s via mobile money, ATM withdrawals, card swipes, over the counter withdrawals, cheques issued, standing orders and more, each attracts a charge. It would be prudent to have a checking account that has the cheapest fees to operate, so each time you access your account you aren’t charged. While carrying cash or keeping it handy might be a security risk, it sometimes is cheaper to pay with since there aren’t extra fees to handle the transaction. Try and make as few withdrawals from the account as possible.

Plan for the Next Year:

To achieve your goal, it is good to remember that your budget is a work in progress. It would be unusual to completely nail it the first time around with expense categories that fit perfectly into your life and projections that are spot on. Instead, you will find that one thing you did worked well, and something else didn’t work at all. Keep written notes so that you can be better prepared to tackle next year’s budget.

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