Three of the most common new year’s resolutions are losing weight/being healthier, quitting smoking (don’t worry, we will tackle this one a bit later!) and achieving financial goals. These financial goals may vary from paying off debt, saving for that dream vacation or just being more in control of your finances. If achieving financial goals is your 2017 new year’s resolution, then it is time to put your money where your mouth is. It is nearing the end of the month and your first paycheque for 2017 is in your near future. This means that there is no more hiding – it is time to act! So today we are going to talk about how to create a budget.
Step 1: Get rid of that attitude
As with a diet or any other big change, you need to be in the right mindset. If you are going to see it as this negative and horrible thing you need to do, you will most probably not want to do it. Therefore, writing down your goal or having a goal board is a great way to remind you what you will be receiving in return for all your hard work.
Step 2: Gather all your financials
This means gathering all your bank statements, accounts, slips, credit card statements, bills, and your payslip. Having all these documents in the same place is the first step in starting your budget. (I will give you some time to go and look for them.)
Step 3: Make the lists
Create a shortlist of your monthly expenses and income. It may be helpful to make two columns, in one you write all your imaginable expenses and in the other all your income.
Step 4: Fixed vs. variable
Divide your expenses into two categories, fixed and variable. A fixed cost would be something that you pay the same amount for every month, for example your car payments, DSTV or gym membership. Then write down your variables: these are costs that are not fixed, they change as your behaviour changes (an example of this is petrol: if you drive less this month, you will pay less for petrol this month). Doing this will start to give you an idea of what the things are which you can save on and this takes us to step 5.
Step 5: Start cutting
Identify the expenses you can do without. Also identify the variable expenses you can save on and start implementing behaviours to achieve that goal.
Step 6: Prioritise
Prioritise the expenses and make sure you plan for financial wealth, retirement, risk, health, etc. Prioritising allows you the opportunity to really look at the things that are most important in your life. Be careful to not fall into the “I want it now” trap. Many people, when they are still young, do not see the need to plan and save for their old age, but then sit with a big financial problem when they hit retirement. Your budget should always include planning for your retirement and savings for those rainy days.
Step 7: Don’t stop
Your budget is a road map and will give you a good idea of where you are spending money and where the best areas are to cut costs and save. A budget needs to be checked and revised monthly; this is not a once-off!
Step 8: Ask the Google
We live in the technology age and you can find pretty much anything on the Internet. You can also find some very helpful budget templates, apps and “how-to” blogs. Use this to further your knowledge of budgets and to help you gather the right tools.