Financially Fit & FabuIous – Budget to Live Within Your Means
December 13, 2021
0 Min Read
WEALTH building begins with smart money management; it would be difficult to amass a large net worth in the future if you constantly struggle to meet your current bills. One way to manage your funds effectively is to learn how to live within your means.
Living within your means is about finding the right balance between your income and your expenses so that you can achieve your financial goals. A budget is an important tool that can help you to effectively manage your inflows and outflows.
Many Jamaican households with children are headed by women. However, some women sometimes find it hard to formulate a budget though they are the ones primarily responsible for household spending. Creating a spending plan is not as difficult as perceived once the following steps are taken.
1. Track your spending
To become successful in any area of life, you must be deliberate. Budgeting is no exception. To get started on your budget, you must know how much money you pay out every month. For at least one month, write down all your bills and everything you purchase in a notebook or record them on your smart phone.
2. Categorise your expenses
Look at your spending amounts and create categories such as entertainment, personal, household, transportation, health care, and financial. List the different items under the relevant expense heading and calculate the total spent in each area. There are budgeting spreadsheets that can help you with this.
3. Assess your spending
A practical tool for success is to check and adjust. Examine the spending choices that you made; do you think you made the best decisions with your money? Did you find that a lot of your hard-earned cash went into buying frivolous items? Were you able to put aside any of your money for the future? The first step in achieving your financial goals is the process of setting aside a portion of your current income for future use.
4. Consider annual costs
It’s not enough to look at your regular monthly costs when creating your budget. Think about expenses that might come once or twice per year such as your car insurance or servicing. You need to make adequate provisions for these costs in your monthly budget and create a separate account to hold these funds. It is a good idea to put away a percentage of the overall expense each month to help you manage bills. For example e.g. $60,000 p.a. /12 months= $5,000 per month. Creating a separate expense account to hold these funds is a great idea so they can easily be called upon when needed.
5. Prioritise your bills
Pay yourself first! Aim to save 10-15% of your monthly income. This should be your first budgetary expense, as it will allow you to create a fund which can protect you in the event of unforeseen emergencies and kick-start your wealth accumulation plans. …….