“ Risks comes from not knowing what you are doing”
Warren Buffet
To some people, budgeting sounds like a restriction on their freedom. You may ask I work so hard to make my money why should I subject myself to restrictions such as budgets? I will say precisely for this reason that you should be meticulous in making plans for every coin. Remember the point is not to work until you can’t, it is more to create opportunities for living a fulfilling life by creating ways of getting passive income working for you. This is only one of the big pluses of budgeting but let’s delve into the details and look at What budgeting can do for you this year.
- Plan for and build your security.
Our first line of defense is the Emergency funds and the right insurance; A budget should enable you to plan and put away some amount of money for emergencies. Typically, this should cover between 6-9 months’ worth of your living expenses. We are talking about typical monthly obligations that need to be met. Budgeting helps you put aside little by little until you have enough funds put away in your emergency funds.
It’s important to assess the kind of insurance that you need for your lifestyle. Also, stagger the insurance premium payment due dates so that they all don’t fall on the same month. This will lighten the burden of payment. Discuss with your insurance broker whether you can make monthly payments so that when the premium is due, you only need to make that month’s payment and you are good to go.
- Live within your means.
A good budget helps you create a disciplined life. The essence of the plan is to show you realistically what you have as income and what you have as obligations. This then helps you map out your expenses, what you need to save as well as what should be earmarked for an investment. I cannot emphasize the importance of budgeting based on the income you have.
- Achieve set goals.
We’ve agreed that a budget is a plan that tells your money where to go. So as you budget according to your financial plan, you will have some amount set aside for several things. It could be to get out of debt, which means the budget will factor in the money that needs to be set aside for debt repayment.
Through budgeting, you can easily project when you will be debt-free and therefore what you need to start planning for thereafter. Your plan could be to invest a certain amount of money monthly, which you can also achieve by reflecting it in the budget. At the end of the day, the budget helps us navigate and achieve our goals, if we stick to it, of course.
- Plan for financial growth.
A budget can help us in forecasting our financial future. A good budget should cover the short term which is anything from 6 months to 1 year, medium term which is 3 to 5 years, and long term which is longer than 5 years. Don’t worry if you can’t see that far into the future. The key is to plan as far as you can. Also, project how your life will change. Will you be ready to buy your new car in 2 years, the deposit / down payment for the house will be due in 3 years, so you need to start putting something aside in the budget. This visibility of what you want in the future helps you start taking the right actions to help you win.
- Plan for giving.
Let’s be honest folks, times have been a bit tough, and if you are like me rarely does a couple of weeks pass before you get a request for some type of contribution. Helping others is part of our culture however it’s possible to give until you find yourself giving more than you can afford.
A good budget should enable you to put aside conscious funds for giving. And once your quota is depleted that’s your cue to pause. I know some months can be heavier than others, but the trick is to be consistent with putting aside the amount monthly.
- Plan for fun.
Planning for fun helps you enjoy yourself without having to get into debt. There is nothing as frustrating as taking out debt to pay for a holiday trip, for sure while you may enjoy yourself during the trip you will be saddled with regret when you have to pay back that debt with interest. A good budget helps you to progressively save for the upcoming holiday season. If you invest the funds in a short-term instrument such as a money market fund or a Treasury Bill, you get the boost of earning some interest.
A budget helps you live in a disciplined way the lifestyle you want while making sure your future is taken care of.so view a budget as the tool that it is and if you are in need of a budgeting spreadsheet to start you off make sure you download it from our resources.
There you have it, if you view a budget as the tool that it is, you will do quite well in your journey to financial freedom and even I dare say generational wealth creation, it just with the small steps and of course, consistency.
As always I’m rooting for your success!