Budgeting Tips to improve your Finances
If you want to control your spending and work towards achieving financial wellness you need a budget. A personal or household budget is a summary that compares and tracks your income and expenses for a defined period, typically one month. While the word "budget" is often associated with restricted spending, a budget does not have to be restrictive to be effective.
A budget will show you how much money you expect to bring in, then compare that to your needs (rent and medical aid) and your wants (entertainment or eating out). Instead of viewing a budget as a negative, you can view it as a tool for achieving financial wellness.
Tip #1 You have more income than expenses, consider adopting the “50-30-20” budgeting philosophy. In a 50-30-20 budget, "needs," or essential expenses, should represent half of your budget, wants should make up another 30%, and savings and debt repayment should make up the final 20% of your budget.
Tip #2 If you do not have a consistent income (for example, from a seasonal or freelance job), consider using the income from your lowest-earning month in the past year as your baseline income when you set up your budget.
Tip #3 If you're not confident that you can budget your money, adopt the “envelope system” where you divide the money for spending into separate physical or electronic envelopes ( i.e. between your bank account and mobile money) for different spending categories. When an “envelope” becomes empty, you'll have to stop spending in that particular category.
Making a budget may not sound like the most exciting activity (and for some, it's downright scary),but it's an important part of keeping your financial house in order. With proper use you can spend less in one area, you can spend more in another, you can build a saving fund or invest in building wealth. Overall making use of a budget is an excellent tool for achieving Financial Wellness.
Comments