“A goal without a plan is just a wish.”
– Antoine de Saint-Exupéry
It is a well known fact that achieving success in any domain must begin with good planning. Budgeting can seem like a daunting exercise to some and following through even more so. It does not need to be. This article aims to put you in a can do frame of mind with regards to managing your finances.
Making a budget
Budgeting needs to be systematic, although it may not be highly detailed. You won’t be able to forecast your expenses down to the last penny so don’t fret if you if you feel like you missed something. Income can be variable too. Start with the broad strokes. Your first budget draft will likely undergo some refinement.
A budget needs to balance out your income and expenses. You need to know both well. While income is usually straightforward, you can classify expenses to make them more manageable. Your main expense heads will likely be as follows:
- Rent and utilities
- Food and groceries
- Commute/ travel/fuel
- Other expenses (clothing, haircuts, furniture, handyman, plumber, insurance, phone bills, etcetera)
- Entertainment (cable, movie/ballet/opera/concert tickets, parties, vacations, game console, spa, and so on)
Be deliberate and consistent in how you categorize your expenses. As an example, one person may classify eating out under ‘food’ while another may find it more apt to put it under ‘entertainment’. However you choose to classify your costs have good reasoning for your selections so you can avoid rework later. Also note that some of these expenses may be quarterly, annual or even less frequent. Setting aside small chunks of money regularly for an annual expense, say, an insurance premium will save you from worry when it gets due. This is why a thorough monthly budget is all important.
One of the more important items on your budget is savings. Savings are an investment into your own future. Having a goal for savings is much preferable to having merely an intention. You can plan to save for buying, say, a dishwasher in six months. If you meet that goal you will have improved the quality of your life and likely save some time on a daily basis to boot. You can have larger and longer term goals such as to buy a house or have a child. Some goals need you to enlarge your income and indirectly to plan your career. Budgeting therefore can be a starting point for managing your life! A humble household budget can become your motivation for taking account of your progress and to articulate your life’s most meaningful goals.
Sticking to it
Easier said than done? It all depends on perspective. One of the things that will try to mess with your budget is undue temptation. Don’t let it. A nice dress in the shop window, a great holiday deal, amazing discount on a piece of furniture – these are all baits that marketers cleverly lay out just to take your money and derail your careful planning. The next time you find such a bait ask yourself if it is worth your attention. Can you buy that sofa and still make your loan repayment? Is a new jacket more important than sticking to your plan of moving into a bigger house with your partner? The correct answers will set you free.
“Persevere with a plan to reach your passion, and life will be good.”
– Homer Hickam
The other factor that may seem to sabotage your budget is deficient planning. Perhaps you forgot to factor expenses for the festivities into your budget. Don’t torment yourself too much and fix it. Make sure you don’t have to chip into your savings for something like that again. As you evolve and improve, so should your budget.
One may always achieve success without planning – by accident. The probability of achieving your financial goals without deliberate budgeting is less than the odds of winning the sweepstakes. You don’t have to be a finance major to manage your own money. Budgeting is a simple yet powerful tool that is within your grasp. It does not matter if you are a student or a seasoned accounting professional expat who sends money internationally to your family by the bucketful. Budgeting is for everyone.