Most people look at budget as a means to an end, as something that
is set to frustrate them and not allow the flexibility to enjoy their money.
That is I find, part of the larger problem with society, we do not embrace Just How Powerful a Tool a Budget Can be.
A budget that is
structured correctly and its spent accounted for is by far the greatest tool
that one can have to enable that we succeed in making money. It is the greatest
Tool one will ever have at their disposal, and the best part is – You Set your
own budget. No one can force it on you. It is truly dependent wholly on you.
To best manage your Spend, understand therefore also that budgeting
can help you achieve your goals. An
important part of effective budgeting is setting goals and using your budget to
help you achieve them. Your goal might be as simple as saving up enough money
for tickets to a soccer game like the E250 that we now need to pay to watch the
Kings Cup (well, no one could have foreseen how hefty this one would have
been), or as arrogant as retiring by 40 (I hear many say they want to retire at
40 – that is until they hit 35 and realize that they are not even half way to
affording their lifestyle – let alone retirement). Or it might be both!
Budgeting makes it easy to establish both short- and long-term
goals and track your progress toward them.A good budget will help you do all of the following:
1.
Get Beyond the
Next-Paycheck Mindset
When
you're always thinking about the arrival of your next paycheck, that probably
means you're burning up your current paycheck and spending the next one
(whether by mentally accounting for where it will all go or by putting
purchases on credit cards) before you even get it.
If this
situation describes you, it's likely that you're living beyond your means and
will need a very holistic change, first of your mind, then of your habits.
Since no job is truly guaranteed, and thus neither is your next paycheck, making it a goal to fit your expenses into
your current income is an important one. This way, even if you lose your
job tomorrow, at worst you'll be starting at zero - you won't already be in a
hole.
2. Make short and long term projections
A budget will help you plan for short-term expenses, like your monthly
bills, and mid-term expenses, like vacations, as well as long-term expenses,
like buying a house, paying for a child's college education and putting money
away for retirement. When you have a spreadsheet or notebook in front of you
showing how much money you expect to make over the next few months (or years),
how much of that money goes out every month and how much you have left to save
each month, you'll always know when you need to cut back on spending, when you
can afford to loosen the reins and how long it will take to save for major
goals. And if you're not happy with the numbers, knowing what they are will
help you take steps to improve your situation, whether that means focusing on
paying off credit cards to increase your monthly cash flow, or getting a
promotion or switching companies so you can make enough money to afford
everything you need and want.
3. Substitute short term items according to priority
For a
short-term goal, such as being able to afford tickets to a soccer game next month,
you may simply be able to substitute one expenditure for another. If you
normally go out to eat, you can trade a meal for the game. If your budget is
tighter than that, you may have to take a more drastic measure like cutting
your grocery bill by eating lots of pap, beans and rice-based dishes and
cutting back on more expensive items like meat and cheese.
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