Budgeting is a tough exercise to begin with, so tough that only a few have the guts to see it through. If it is easy then, probably, everyone can answer positively when asked whether they have a budget. But the fact of the matter is, less than 25 percent of the working populations actually have it.
Why is this so?
The reasons for that vary but the most popular ones include: ‘something just came up and it could not be avoided!’ If you are experiencing this right now, here are a few tips that might help you to manage your money and stay under budget.
1) Take thorough inventory of your expenses. The first thing you need to do is to determine where the money flows, and you do that by keeping a close tab on your spending. Have a system to record every single spending you make, no matter how small, by using pen and paper or spreadsheet.
Pen and paper might be a better choice because you can carry them everywhere. Tally the amount at the end of the day, and do this for at least 6 months.
2) Group your sending into category. You can have something like ‘Household’ which includes your phone, power and water bills.
3) Record how much you typically spend on each category. By the end of six months, you will have a good idea of your spending pattern and unplanned event spending, like buying your friend wedding gifts or newborn baby present.
4) Assign a percentage to that category. You get the percentage by dividing your total expenditure in that category against your total income. Some people like to use average as a benchmark but you will see later why this is a more effective approach.
5) Start a budget plan. Based on your percentage for each category, plan a budget when you receive your salary or profit.
6) Live within your means. You aim is to trim as much unnecessary spending as possible. If you used to go for the movie four times a week, you probably can live with two. These little efforts, which seem trivial at first, will create a compounding benefit to your financial well being in the long run.