Budget, budget, budget! It’s what you should be doing before you even think of saving money or paying your first bill each month.
However, for some, money comes and money goes without any proper understanding of how a budget at the start of the month could help you.
It’s no secret that factors such as rising food prices as well as increases in inflation and interest rates have forced all of us to start thinking seriously about saving for the future.
However, saving is not the first step you need to take to take care of your finances. Instead, drawing up a budget plan can set you on the right path on your financial journey, reiterate the experts.
We tracked down some expert advice to help you start your budgeting journey. Here are the top five things they say you should be doing:
1. Know your income
Before you draw up your budget plan, you need to know how much money is coming in. Work out the net income (after tax) of everyone that contributes financially to your household, whether it is your spouse, children or parents.
If you have a side hustle, you include the extra money that you make into your budget.
2. List of your expenses
Separate the expenses in your budget into two categories:
– fixed costs which include expenses such as rent/bond, levies, school fees, car payments, insurance and bank fees.
– discretionary costs which includes entertainment, fuel, clothing, data. toiletries and transport.
Also, create a space for your savings - money that you are putting aside towards a savings goal. It is important to have a savings goal in mind that so you know what you are saving towards.
3. Emergency fund
Besides saving towards a saving goal, you need to start putting money away into an emergency fund. Having some money set aside for an unexpected situation will leave you in a better position compared to borrowing the cash when you really need it and then going into debt.
This is a critical step of any budget plan that will allow you to make informed decisions. Know how much money you can spend this month and save money towards buying what you want next month. Having your financial priorities in order will also prevent you from making a mistake that many people make: buying things that you don’t have the money for.
5. Be disciplined
You need to be committed and motivated to stick to your budget plan. Sometimes the thought of having to write down all of the information for your budget plan may sound tedious. However, if you stick to your budget plan, you will reap the rewards.
There are budget apps available that allow people to draw up a budget, monitor spending and track expenses. These can be useful, especially if you need to make any immediate changes.