The first step towards achieving your financial goals is making a budget. You may follow these five (5) simple steps when making a budget:
1. Calculate your expenses
It is important to determine how much you are spending on a monthly basis. It may be useful to calculate an average for six months to a year as this will give you a more accurate picture of your spending based on the fact that some expenses are intermittent (e.g. motor vehicle insurance, holiday spending etc.). You can look back at your credit card statements, bank statements, receipts and other financial record to get a fair idea of your spending habits and financial obligations. It is important to be very thorough when calculating your expenses as forgotten expenses can derail your savings plan.
Having an emergency fund is a must as it will help you in the event that you suffer any unexpected financial blow and will help to prevent you from going into debt or deeper into debt. Also, if you are working towards a goal, your emergency fund can stop you from having to take money from your savings when unexpected expenses arise.
2. Determine your income
Calculate your actual income. In addition, to your regular monthly salary, you should take into consideration all other income sources such as child support, alimony, rental income etc. as well as extra funds that you will receive throughout the year.
3. Set savings and debt payoff goals
Subtract your expenditure from your income to determine whether you have a budget overage or shortage. By doing this, you will be able to set realistic savings and debt payoff goals.
If you are spending less than you earn, you are in an excellent position to set your savings and debt payoff goals. It is very important that you pay yourself first each month by saving. Automate your savings. Set up a Salary Deduction or Standing Order and send money from your salary directly to your First Regional Account. Also, if possible, pay the maximum amount allowable by your employer’s pension scheme.
If you are spending more than you earn, you will have to figure out how you can reduce your expenses. For example, unnecessary expenses such as buying soda everyday add up over time. You should also consider ways to generate additional income.
4. Track your progress
Track your progress by keeping a record of all your income and expenses.
5. Be realistic
Try to stick to your budget most of the time. Occasionally, a need may arise, which will necessitate your breaking your budget. This is okay, provided you get back on track as quickly as possible.
Sticking to your budget will help you to reap the sweet reward of achieving your financial goals.