Life has many milestones. There will come a time when you will sign your first lease, buy a new car or start a family. One thing that you have to know is that these milestones come with financial responsibilities. You’ll have to learn how to plan your finances so that you have no difficulties paying your bills or honouring your financial obligations. Creating a budget will be one step through which you can organise your finances. The task may be daunting, but if you follow these steps, it can be easy!
Start by writing down your main goals and list the reasons why you want to make a budget. Are you trying to save money for something specific? Do some research and establish what each goal will cost you. If, for example, you want to get a degree, do some research and establish how much it would cost you to complete the university course. This will give you the amount you need to save in order to reach your financial goal.
You also need to keep track of all your expenses and know how much you’re spending each month. Continue this exercise for at least three months in order to get a clear picture. Also track the amount you earn every month. This will be easier for people who have a regular income. For those who are paid commission, make sure you factor in all incomings.
Comparing your income and expenses will give you a picture of your finances. Ensure that you set aside some for savings as well. Don’t forget to list all your debts and when they’re due. Make sure you set aside some of your income purposely for clearing away your debts.
Organise them in such a way that you prioritise clearing the debts that have high interest rates first. Some people propose paying off the debts from the smallest to largest balance. Whichever approach you use, make sure you start with those that have higher interest, as well as ensuring that none fall back in repayment.
Apart from saving, you need to create a budget for retirement, ensuring that you put aside some money for this purpose. Normally people set aside a certain percentage for their retirement scheme, it’s up to you but ensure what you’ve saved can make a difference to your future.
The last part of making your first budget is to put all these figures together. If you find that the income is more than expenses, you are good to go. If you find that there is a deficit, you need to go back to your plans and either reduce your expenses or look for ways to cover this with extra income.
Disclaimer: The above information is general in nature and not intended to be financial advice. You should consider seeking professional advice before following any suggestions in this blog/website.