Having control over your money is important, in fact the word important doesn’t even sum up how important it is. Both for your well-being and for your peace of mind, the only way you can control the money you have, is by having a budget and sticking to it.
Not quite sure how to get started? Below is a list the following strategies and a step by step guide on how to create a personal budget:
Set financial goals: Over both a short and long term period, create a list of financial goals that you aim to accomplish – be them small or big. Short term goals are what you want to achieve within a year or shorter – like paying off your credit card or going on holiday. Long term goals are what you want to achieve over a number of years – like retirement.
Know what your net income is: Your net income is your total salary before expenses.
Track your spending: Not sure how much you’re spending when going out, or getting take-aways? It’s hard to work out how much money you have to spend when you don’t know how much you’re spending. Why not download a budget app to help you keep track of what you spend your money on.
Next. Create a budget:
Step one: Calculate your net income by listing all of your income in your budgeting tool (on paper or on an excel spreadsheet).
Step two: Add up your fixed monthly expenses – these are your bills you have to pay, like your car, rent, insurance, medical aid, petrol, water, electricity, groceries, loans and credit card.
Step three: Determine your flexible expenses, these are expenses that you currently pay for but are not essential, like: going out, getting take-aways, retail shopping and gifts. These should be adjusted to what you can afford. Note: These come after your financial goals and fixed expenses.
Step four: Subtract your fixed expenses from your income, this will determine your cash flow (your money coming in versus your money going out). If you get a positive number, it means you make more money than what you spend – yay! If you get a negative number, it means you spend more money than what you earn. This is where you decrease your flexible expenses.
Remember: Whatever your number is, there is power and comfort in knowing. This is the first step of planning your financial future.
Step five: Stick to your budget, monitor it and adjust it. Sticking to your budget isn’t always easy, what you need to do is encourage yourself, keep on going at it and as time goes on you will begin to think about money differently.
By creating a budget, you create control over your money. By regularly monitoring your money (weekly) you will know how much you have left to spend and be able stay on track. Once you keep on going, your budget will become the tool that gives you financial success.
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