3 min read

How To Set A Personal Budget

planning for wealth

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I remember saying to my mentor, “If I had more money, I would have a better plan.’ He quickly responded, ‘I would suggest that if you had a better plan, you would have more money,’ You see, it’s not the amount that counts; it’s the plan that counts. – Jim Rohn

 

Planning and budgeting your finances will keep you enlightened about how much you save, invest, spend and owe. It is a way to reach financial goals, accumulate wealth and curb bad money habits. Money should be accounted for.

Do you have a plan for your money? Do you have a financial goal? What do you spend on? How much do you spend each month on food, internet and transportation? How much do you save and invest? Are you an impulse purchaser? What occupies the majority of your expense?

Whether you work for money or gain it on a silver platter, you need to be able to track and give an account of how you spend it. Set a financial goal and a personal budget to attain it.

Step 1 – Make a Note of Your Sources of Income

Note down all your sources of income. This may range from salaries to money from side hustles and gifts from family or friends. Take note of all these and have a good idea of the total amount you receive monthly.

Step 2 -Record What You Spend On Daily

This week, write down everything you spend on. Whether you record on Evernote, a financial app, an Excel Sheet or a notebook, make a thorough list of what you spent on and how much you spent at every given point. At the end of the week, calculate the total amount spent.

Step 3- Write Down all Your Expenses

Now, note down all your expenses. Identify fixed and recurring expenses such as – internet bills, electricity and water bills, tithe, money for family members, charity donations etc. Jot down the variable expenses like food, clothing and transportation as well. 

Step 4 – Cut Down on Your Expenses

Frugality is key! From tracking your spendings, you will realise where most of your money goes. Reduce the nice-to-have items on your list. You don’t need all the fancy things. Neither do you have to keep up with the Joneses. You don’t have to eat out as often as you do or shop for a new pair of shoes each month. I read somewhere that money looks better in the bank than on your feet. 

Step 5- Treat Your Savings and Investments like Recurring ‘Utility Bill’

Just like the way you pay your monthly utility bills, treat your savings and investments as such. This time around, pay them first before your utility bills. Don’t save too much to make you uncomfortable. Remember moderation is key. Moreover, patience and time are factors of wealth creation.

Step 6 – Have an Emergency Fund.

Set money aside for emergencies. Mad cash comes in handy when unforeseen circumstances which require you to spend money come up. For precautionary purposes, keep part of it in your bag or purse and use, only when the need arises. Be quick to replace it afterwards. You can even keep the greater part of this money in a fund which will be easily accessible when needed, yet appreciate overtime when left untouched.

Step 7 – Set Aside Money for Entertainment

This should be a small amount set aside for treats. Let it be a reward bank where you withdraw to reward yourself monthly for staying within budget or smashing some goals.

 

Start budgeting your personal finances today. Give your money a facelift. Set your financial goals and reach them with a plan.

 


Also published on Medium.