Being financially prudent is one way to hack managing your finances. You want to ensure that you are not spending more than you are making whilst still sorting out your needs. This is also a perfect time to note that budgeting isn’t an exercise for the poor or middle class alone, as the wealthy also budget their spending.

A budget isn’t limited to only businesses, government, or corporate organisations. Individuals and families can and should have a budget as well.

My Money Coach defines budgeting as the process of creating a plan to spend your money. Creating a budget allows you to determine whether you will have enough money to do the thing you need to do or would like to do.

So basically, a budget is a financial plan for a defined period.

Having a budget is essential because it helps you:

• ensure you meet your basic needs

• plan your finances better

• make better financial decisions

• track what you are spending on

• stay out of debt or manage your debt

• get greater control over your finances

Before you create your budget

Now that you understand what a budget is and its usefulness to you and your personal finance, you must know a few things before you create your budget.

1. Ask yourself why:

   People create a personal budget for various reasons. For some, it’s to manage their debt or when they want to make a substantial financial purchase. It can also help them get their finances together, and better track expenses. Your reason could be any of those mentioned above or one very peculiar to you. However, it is crucial to have a why as it will strengthen your resolve.

2. Be disciplined:

   It is one thing to draw up a budget; it is another to stick with it. To reap the rewards of budgeting, you need to be disciplined and highly committed. Discipline in this context means you don’t spend more than the allocated funds in that segment unless in unforeseen critical moments.

3. Be open to lifestyle changes:

   The actual act of budgeting will come with many lifestyle changes due to the why we mentioned above. You may have to postpone that vacation, reduce the number of times you eat out, cut down on unnecessary shopping, etc. if you want to attain what you are budgeting towards.

4. Find a financial partner:

   We live in a world where digital banking solutions exist to help you reduce time spent in a physical bank while still meeting your financial needs. An example of such is Brassmoney- a current account made for people on the move with budgeting as one of its features.

Five steps to creating your budget

1. Set your budget goals: As we mentioned above, you must have a budgeting plan. This plan will influence how you draw your budget. Make a list of your short-term and long-term financial goals. Although your budget goals can be flexible and adaptable as a situation arises, having one will benefit you.

2. Know your monthly income:

   While budgeting may be easier for those who have a steady income, for those who don’t, they simply need to work with an average amount. For individuals who have multiple sources of income, you can also calculate the average amount to ensure you are budgeting correctly. Learn how to calculate your average income amount here.

3. Create a list of your monthly expenses: This will put in perspective all you spend monthly. For example- food, data, transport, clothing, family needs, groceries, electricity, etc.

4. Prioritise your expenses: Place your monthly expenses on a priority list. Only spend money on the things that are needed. Cut down on unnecessary spending. For example:

   • reduced food buying and more self-cooking

   • reduced impulse shopping

   • take advantage of discounts

5. Use the 50-30-20 method: This is a popular budgeting rule which helps you allocate your income accordingly i.e.

   • 50%- towards your needs e.g bills and feeding

   • 30%- towards your wants e.g. fashion items

   • 20%- towards saving

Conclusion

A decision as simple as budgeting could transform your finances in ways even you can’t fathom. Use the above steps to create a budget that works for you and make a personal commitment to stick with it. Brassmoney is your reliable financial partner so download from the App Store or Google Play Store and sign up to start budgeting.