How To Budget

A BUDGET IS A SPENDING PLAN FOR YOUR MONEY. WE ALL NEED ONE. THIS HELPS YOU DECIDE WHETHER YOU HAVE ENOUGH MONEY TO COVER THE THINGS YOU NEED AND WANT. NO TWO MONTHS WILL EVER BE THE SAME SO BEAR THAT IN MIND WHEN STARTING A BUDGET FOR THE FIRST TIME. BUDGETS ARE A GREAT WAY TO START MAPPING OUT THE FUTURE OF YOUR FINANCES. 

HERE'S HOW TO START.



GATHER DEETS ON INCOME

Before diving into creating a budget, you have to figure out all sources of income. This is the take-home pay you receive from your “9-5” and any side hustles like babysitting or personal training on the weekends. Your take-home pay is determined by subtracting NIB or income-tax from your gross (total) salary. What you’re now left with is your net salary, which can be used to spend and save.

If your income fluctuates because you work on commission or receive additional income from tips (if you’re working in the hospitality industry), then take the average of income received in the last three months, and use that figure as your income.

Oh, one more thing! Make sure you always place your net salary at the top of your budget. It's good to have a visual of what you're working with first.


JOT DOWN MANDATORY EXPENSES

Go ahead and jot down the "must-haves" aka your essentials. These aren't the expenses where you can say, "Oh, snap I forgot to pay that". Here you will include line items such as mortgage/rent payments, utilities (like water and electricity), groceries, gas bill, etc. This should also include minimum debt payments for credit cards, student loans, property loans, car payments, etc.

When you're all done your list should look something like this:

Mortgage - $1,000

Electricity - $200

Gas - $100

Groceries - $150

Student Loan - $300

[Continue jotting them down]


CREATE FINANCIAL GOALS

I believe this is the most important step in a budget because it allows you to prioritize what matters most to you. This is the point where you really sit down and think about what you want. Is it to be debt-free? Live comfortably in retirement? A bit of both?

Now is the time to breakdown those goals into monthly bite sizes. It's here where you'll figure out how much you'll be putting toward your emergency fund, retirement account, debt repayments (i.e. more than the minimum payments), etc.

Your list should now look something like this:

Mortgage - $1,000

Electricity - $200

Gas - $100

Groceries - $150

Student Loan - $300

Emergency Fund - $200

Retirement Acct - $250

Debt Repayment - $400

ADD NON-ESSENTIAL EXPENSES

This step is all about the "extras". You will create line items such as getting your hair done, entertainment with friends, gifts for parents, birthdays, etc.

I would also add some #moneytoblow aka "fun money" in this section too. A budget has to be realistic and the reality is our lives aren't just surrounded by the essentials and debt repayments. We gotta live a little aye?!

But we shouldn't go crazy in this step either. Everything in moderation!

Your list should now look something like this:

Mortgage - $1,000

Electricity - $200

Gas - $100

Groceries - $150

Student Loan - $300

Emergency Fund - $200

Retirement Acct - $250

Debt Repayment - $400

Hair Care - $100

Gifts - $50

Fun Money - $50

MAKE EVERYDOLLAR COUNT

I'm a Dave Ramsey junkie and he always encourages his followers to make "everydollar" count. He has a whole app and website called Everydollar which helps persons achieve a zero-based budget.

Now all that means is that your income (money coming in) less expenses (money going out) will equal to zero. You will be assigning a "task" or a "little soldier" to work 'everydollar' you make so you can have a clear idea on where everything is going.

This by no means equates to you having zero dollars in the bank. Let me explain...So let's say you earn $1,500 a month then your aim would be to spend, save, or invest each of those dollars which will all add up to $1,500. Gat that? Great!

I would encourage all of you to check out www.everydollar.com. You won't be disappointed.

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