Budgeting is creating a plan to spend your money. It is a defined summary of expected income and expenses for a qualified period of time. The process of budgeting aids in prioritizing spending focus.
Why is Budgeting Important?
1. It keeps your finances on track: If you are constantly worrying about money and always wondering where your money went, budgeting can put you in control of your financial situation. You can prioritize spending and know when you need to stop. It keeps you on track and gives you a chance to plan for the future
2. Budgeting helps you achieve your goals: A budget helps you focus on things that are most important to you. It creates a plan that you can follow to make sure you reach your financial goals
3. It helps avoid debt: In monitoring your bills, paying on time and controlling you expenses, a budget helps you stay out of debt and can help you get out of debt
Essentials of Budgeting
1. Be committed to budgeting: Making a commitment to control your finances gives you a clear picture of what you are really spending money on and how much it actually costs you. You are likely to experience motivation to be in control of your finances as soon as you commit to budgeting!
2. Determine your goals: While making a commitment to budget, you need to determine what your spending, savings and investments goals are. The first step in achieving financial goals is to define set goals
3. Create a plan to achieve your goals: After determining your financial goals, putting a price on your goals helps you create action plans to achieving those goals. For example; saving a defined amount every month, putting limits on your spending. Understanding what it takes to achieve your goals makes you feel much more in charge of your financial situation.
4. Track how you spend: After defining your financial goals and how to achieve them, monitor your expenses vigorously. Compare your income to expenses and avoid buying things you do not need.
5. Use Credit Wisely: Credit can be a great financial advantage and comes in handy in emergency situations. However, you must avoid poor credit management. Avoid borrowing money to cover household or food expenses, do not use credit to buy things you do not need. Most importantly, do not borrow to make payments on existing debts.
Some Budgeting Tools:
i. Budgeting Excel Template
ii. Budgeting Apps: Here are some apps which can help in budgeting! Good Budget, Mint, Unsplurge, and Wally