- If you are not careful you end up in the same cycle of having no money to use in the cause of the next month.
- You can set a budget for yourself and set steps on how to achieve it.
It is the end of the month, and some have been paid or will be paid soon.
Month-end salaries can be tempting if you have not set aside a budget.
There is a dress you want to buy, electronics and there is shopping to be done, maybe fees to be paid among other things.
If you are not careful you end up in the same cycle of having no money to use in the cause of the next month.
You can set a budget for yourself and set steps on how to achieve it.
But why do you need to budget?
To avoid debts
As you budget your monthly expenses should not exceed your monthly income.
With a budget, you avoid borrowing to maintain your lifestyle.
It helps you achieve both long-term and short-term goals
Depending on the goal you have set, budgeting your finances allows you to know how much you are required to set aside for that goal.
It kind of forces you to make sacrifices for your goals.
Prepares you for a rainy day
Setting up an emergency fund caters for unforeseen situations. Ensure you can the account quickly and easily.
An emergency fund account is different from a savings account. It should not be used to pay for your vacation, car services, hair or nails.
You become responsible and invested in your finances
With budgeting, you will be able to account for your finances, how you use them and why. It also helps you with setting financial boundaries.
But how do you set a budget?
Calculate your net income
This is your take-home salary after the taxes and the deductions. Know how much you are receiving, and when you are receiving it.
If you are a freelancer, keep a record of when, where, and how often you are receiving your income.
With this, you will avoid overspending.
Track your spending or expenses
This is the second step; know where your money is going. The expenses you need to cater for.
Categorize them, that is the fixed monthly expenses and those that are variable.
Record your monthly spending, this guides you to know where you need to cut back.
Set your goals
Note down your short-term and long-term goals.
It will help you know what you need to cut back on when it comes to your expenses.
Draw your plan
Compare your fixed expenses and variable expenses to your income.
It will give you a clear picture of what you are spending and what you need to be spending.
Now, compare it to your income, and your goals.
Adjust your spending according to your budget
Here, you make adjustments to your spending to avoid overspending and pull more money to your goals.
Review your budget often
Helps you stay on track.