Budgeting 101: Why & How?
As you grow older and start earning, you will eventually realise the essence of budgeting. Taking ownership of your expenditure is mandatory to avoid overspending and going in debt. There’s no denying on the fact that structuring a budget and having to conform to it requires perseverance and endurance. The luxury of having credit card makes us dive in more into debt.
But we assure you that the outcome will certainly outweigh the sense of affliction you are facing during this whole process. Constructing either a monthly budget or a yearly budget depends on your desires- do whatever you believe is most suited to you. Budgeting allows you to plan beforehand and to have a general overview of your expenditures.
Generally, budgeting is a financial record of your spendings and possible future expenditures. It is a tool to help you keep track of your financial health and to avoid you from going overboard on your expenses. For every penny used, key it to your system to ensure that it reads the correct values!
Set up your budget
Setting out a budget is as easy as it seems. It will be much easier to digitalise the entire process by using a budgeting software but if you prefer to pen it down on paper, feel free to do so. Start by referring to your previous monthly bills include your credit card bill as well to have a gist of your estimated budget.
Sequencing your expenses is of importance to keep track of what exactly you are spending. List everything from entertainment-expenditures to basic necessities like food, water, housing etc. Once you finish this mildly time-consuming process, begin to compare the final values with the income you are earning in current status quo. Make sure that both values somehow aligns and matches up.
Differentiate between a want and a need
It is easy to get swayed by this whole process because you are feeling swamped and overwhelmed by your expenses which leads you to stress-buying.
Simply by having two separate columns- one for needs and one for wants, you are able to simplify your life by setting your priorities straight. For instance, making a trip to Hawaii is a want because you can still live in normalcy without having to go to Hawaii. But having food on your plate is a necessity because you will not be able to survive without it.
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