We all have been broke one time or more in our lives. Where you don’t have any money on you and don’t have any access to any money at that period. You feel helpless. You feel like the world is caving in.
Now let’s paint a clearer picture.
Imagine this! You wake up on a Saturday, thinking about how normal you’d spend the weekend, how it wouldn’t differ from the past weekends, in any way.
Just then, your electricity goes off and you observe you’ve been cut off by your utility provider. The electricity bill is due. You start calculating. How did that happen?
While at it, you realize your subscription to your favorite show, or podcast has also expired. Now, you need to renew your subscription.
You get worried. You start complaining about the day and how it’s being awful to you. A thousand and one things is calling for your money and it all seemed to come from nowhere.
Yet, you keep forgetting a crucial piece of information. Yourself.
This wouldn’t have happened if you’d budgeted your expenses. You’d have seen this coming.
But, now that you know what you did wrong, what itself is a budget?
A budget is an amount of money or resources set aside for a particular institution, activity, or time frame. When you budget your money, you are saving that amount of money to cover some particular expenses, or, to save you whenever the need arises.
In a lay man’s term: budgeting simply means allocation of funds to a specific purpose or timeframe.
The Benefits of Budget are Inexhaustible but Here are a Few of Them
1. Keeping Expenses under Control
A good budget helps you to keep your expenses under control, not exceeding the budget you have.
2. Setting Life goals
One of the reasons to have a budget is that you almost always have a reason for the budget. You have something you’re aiming at, and the budget will help you achieve it.
3. Not spending beyond one’s financial capability
A good budget helps you understand your income. That way, you wouldn’t spend more than the amount you’d already set aside.
4. Understanding one’s needs
A good budget helps you understand everything you need and everything you don’t. That way, you know what you need to spend on and what you should completely overlook.
5. Staying out of debt
When you have a budget, which you save money in adherence to, the savings will help you get all you need without getting a loan.
6. Preparation for emergencies
An anonymous saying goes thus, “Save, and you’ll be saved.”
If you already have some money saved, when emergencies arise, you won’t be knocking on people’s doors.
7. Retirement scheme
One of the goals to have for your budgeting is to use it as a long-term scheme. When you grow old and retire, your savings will always be there to fall back on.
How Do You Create a Budget?
1. Calculate your income.
Sum up all sources of earnings, including salary, side hustles, and passive income streams.
2. Track your expenses.
Monitor every expenditure meticulously, from bills and groceries to leisure activities, to grasp spending patterns.
3. Set realistic goals for the budget.
Define clear financial objectives that align with your income, ensuring they are achievable within your means.
4. Make a plan for achieving these goals.
Develop a step-by-step strategy outlining actions needed to reach each financial goal efficiently and effectively.
5. Adjust your expenses to fit the budget.
Identify areas where spending can be reduced and allocate funds according to your prioritized financial goals.
6. Review your budget regularly.
Periodically assess your budget, adapting it to changing circumstances and ensuring alignment with your evolving financial objectives.
Beyond budgeting, savings can also help you build your income and keep you from going broke.
One savings myth people have is that you save only when you have a lot of money to spare. Spending before saving. The right way to do proper savings is to save before spending. No matter how little you save, it is the habit that matters most.
How Do You Get to Save Some Money?
Here are some practical ways to save money
1. Pay yourself first
One huge mistake people make when thinking about saving is that they pay others first. Don’t fall into this trap.
With every income, you need to pay yourself first. Save a part of the money, first. Then, start sorting out other bills.
2. Stay out of unwanted loans
Another mistake you can make is to keep getting into loans to sort out your bills. This automatically places you in a situation where you have to pay back some loans before you even pay yourself.
3. Cancel unnecessary subscriptions
Another good way to save some money and keep your budget under check is to cancel unnecessary subscriptions. Check through all your subscriptions and ask yourself the hard questions.
“Do I really need this?”
“If I cancel my subscription, what effect would it have on my life?”
When you have your answers, do the needful.
4. Use the 50-30-20 rule
The 50-30-20 rule is a practical way of saving money which focuses on your income after taxes.
It states that you dedicate 50% of your income to your needs (like rent and groceries), 30% to your wants (like shopping and vacations), and 20% to your savings and debts.
If you follow this way, you’ll have your income fully under your control.