24 March 2017
Managing Personal Finance
The Essence of Budgeting
Personal Financial Management is a critical aspect in our lives that must be prioritized and its success depends on the key element of budgeting. Budgeting helps you to keep track of your daily personal expenditure. It enables you to identify exactly on what, how much and where all your income is being spent. The most effective way for you to keep track of your expenditure is by jotting down or making note of all your monthly income and expenses, you can even create a template on your personal computer on for example Excel noting your income and expenditure.
After you have listed your monthly expenses and have a clear picture of the status of your income and expenditure, minus all the monthly expenses from your income. This total will show you exactly how much you are spending and how much you are left with. It’s all about the in’s and the out’s – tabulate in one column your income and the other column your expenses. It is crucial that you do not spend blindly, always remember that your standard of living must match your income. You only earn a specific amount of income each month and you must manage this accordingly. A manageable way to extend your earnings is to refrain from using your savings account card and credit cards. Opening yourself up to the risk of continuously grabbing that credit card will directly influence you to buy way more than your income can allow and it will only contribute to deeper debt trouble. Close your spending circle. Determine how much would be enough for you and stick to it. There are certain things that are just unnecessary and can be avoided, like the daily coffees, bought lunches and retail therapy sessions are all few habits that weaken your finances and add to your debt heap. Take lunch to work instead and buy a tin of coffee that you can keep at work that should last the whole month. Try and get into the habit of living within your means, avoid spending extravagantly, and do not spend more that you earn. An absolute must if your aims are to get out of debt is to know exactly how much you are spending every month and what your income limitations are. There will always be that tendency to spend extravagantly when there is extra cash in ones possession because man’s needs are insatiable. Overspending can lead to huge debt burdens. So it is very important to exercise discipline when it comes to handling money. The essence of budgeting is eliminating debt. Change your bad spending habits by recognizing it for what it is and by doing something about it. Rather create good spending habits by cutting unnecessary expenses each month and instead saving for those unforeseen emergencies. Implementing these good spending habits on a regular basis will soon ensure that it becomes second nature and part of your lifestyle. With these little and consistent steps money becomes available when you finish paying off accounts. You can then allocate the available amount to the next debt account. This will ensure that you become debt-free sooner than you plan or think