Budget Basics.

How to Budget:

Even the idea of “budgeting” can be daunting for some. It’s recommended to track your spending for one or two months before compiling your budget. You will have a clearer idea of your various incomes and expenses and be ready to present them clearly.

Be aware that seeing the numbers laid out in front of you may be shocking at first. You will face your spending habits head on but take it as an opportunity to start over with your finances and look for ways to retain more of your hard earned cash.

---

Income – (Expenses) = Net Income.

---

When first starting to budget, it may be easier to do pen and paper style budget sheets but if there are variables each month it is easier to simply update those individual figures in a spreadsheet. The recurring figures will not require to be updated this way. Excel Spreadsheets have various ready made budget templates for free.

Ultimately you want to tabulate a list of your Incomes: Salary, Side Hustle, Dividends, Sales and other sources. Next, a list of your Expenses: Electricity/Phone Bills, Transport, Groceries, Entertainment, Loans and Credit Cards. The income minus the expenses is your Net Income.

Budgeting Musts:

---

“Emergency Fund.”

---

If not already included, add an “Emergency Fund” category where you will direct some of your income for life’s unexpected expenses. This way you avoid impulse spends on your credit card.

In addition, if not already, add a “Savings” category. You should be putting away minimum 10% or more of your income straight away on Payday. Even if you are paying down debt, it is still a good idea to “pay yourself first” as much as you can. Meanwhile, aim to pay 10% of Debts.

Divide more expensive costs over a period of months. For example, anything from hobbies, to equipment to recurring beauty treatments. A large recurring expense every 3 months can be split into three budgets in advance instead of one lump sum. Consider it installed savings towards your personal goalsalso known as “sinking funds”.

---

“Sinking Funds”

---

Be realistic and accurate with your figures. Don’t underestimate the food and grocery budget so that you cannot stick to it and go wildly above budget. At the same time, don’t over estimate your costs when you could direct your cash towards something better.

Consider the 50/30/20 Rule which directs 50% of your income to living expenses, 30% on wants and 20% on savings and debt repayment. Review your budget often and allow for adjustment. Look at what categories are too high; look for ways to cut expenses and increase your savings.

---

“Peace of Mind…”

---

Take comfort in your budget knowing exactly what you spending on and how much. A budget gives you control of your finances, controls your spending and provides you with peace of mind on your journey to Financial Freedom.