Oftentimes we find ourselves thinking, "Where did all my money go?" One day we have lots of money and the next it seems like it vanished into thin air. This usually happens when we don't keep track of our money. We need to know what we plan to do with our money in order to make the best use of it.
This is where a budget comes in.
 |
| "Where did all my money go?" |
A budget is basically a plan of your income and expenses for a specific period of time. Budgets act as a road-map – that you design – to help you stay on course and achieve your goals.
Having a plan (also known as "goal-setting") can improve the likelihood of achieving goals. According to a 2015 study by Gail Matthews, a psychologist, people who wrote down their goals were 33% more likely to achieve their goals than those who formulated outcomes in their head (Price-Mitchell 2018).
Writing down your budget, or typing it out, can help you achieve your financial goals. It's important to know what one's limitations are – what you can and cannot spend money on. But before we can expand on what we can spend money on, we have to look at what money is coming in.
Your income is the money coming in. It is the money you receive, usually on a regular basis.
A few examples of income are:
- Salaries and wages
- Interest income
- Dividend income
- Allowances received from parents and/or a bursary/scholarship
Once you've identified how much money you'll be receiving, you can plan on how to spend it.
 |
| Spend it all, or not. |
Expenses are those things we spend money on. These can be regular or once-off expenses. This includes things such as:
- Groceries
- Cellphone contracts
- Water and electricity
- Transportation costs
- Entertainment expenses
A budget typically covers a certain period, such as a week, month, year, etc. Budgets can also be prepared quarterly (every three months, or four times a year). You can decide what works best for you.
It may make sense for someone who receives a weekly wage to prepare a budget weekly, but someone who gets a monthly allowance will probably prepare a monthly budget. As you can see, personal budgets are usually prepared according the frequency of income received and expenses paid.
 |
| Budgets can be weekly, monthly, or yearly. |
The best time to draw up a budget is NOW.
You can draw up a budget at any time. The sooner you do it, the better. Because you'll have an estimate of where you are financially.
I prefer drawing up (and revising!) my budget when I get my income and when I pay my bills. This is usually at month-end. I then see if I kept to my budget and make adjustments as necessary. Not everyone receives their income at month-end. Some receive them weekly, quarterly (four times a year), or even bi-annually (twice a year)!
We're all different and our personal budgets will reflect that.
There are a number of benefits to drawing up a budget. Below are some of them.
Goal-setting
Drawing up a budget can help you set and achieve financial goals. A budget allows you to identify your income and expenses, and it allows you to modify it to achieve these goals.
Say you want to save up money to buy a mountain bike. You can analyse your budget to determine what expenses you can cut out to save money, or you can see that your income is not enough and decide to increase your income to save more.
You may even find that by drawing up a budget you recognise that your income is not enough to cover your expenses, and that may inspire you to look at developing additional streams of income.
Control spending
Analysing your budget may reveal where you are spending a lot of money (and what to cut back on!).
Personally speaking, I realised that since lockdown commenced I haven't spent that much money on Uber trips or UberEATS (don't get me wrong: I love Uber!). While I have made a few trips here and there (within their reduced operational hours), I have spent a fraction of what I used to spend on Uber trips. And if you look at UberEATS – my goodness! I haven't spent a cent on UberEATS since lockdown.
Preparing and/or cooking food at home is more affordable.
Identify spending habits
Identify areas for improvement
Drawing up a budget can help you determine what you need to improve on. This can help you reach your financial goals, because if you know what needs to be fixed you can fix it easier than someone who doesn't know what needs to be worked on.
Thanks for taking the time to read this blog post.
Disclaimer:
This blog post is for informational purposes only and does not constitute financial advice.
The information presented herein is not a substitute for and should never be relied upon for professional financial advice.
Always talk to your financial advisor about the risks and benefits of any financial information shared. If you are looking for financial advice, kindly speak to somebody who is certified and registered with the Financial Sector Conduct Authority (FSCA).
eishstudentbudget™ and its owner(s) are not liable for any loss, harm, or damage you may incur as a result of you using the information presented here.
No comments: