Work with a budget to tame your finances

One of the resolutions you have probably made this year is to be in control of your finances. Perhaps last year was not a good one for you as you wondered where all your money went, as you always found yourself broke at the end of every month. You ran into debts, or even failed to pay for your basic needs.

In the just concluded festive season, you had probably planned to splurge and visit the most exquisite places and make merry. This was not to be as you did not have enough money to spare!

The beginning of the year is the best time for you to set your personal financial goals. However, regardless of your lifestyle and the amount of money you make every month, having complete control of your finances this year calls on you to have a budget and live within it.

Jacob Ngarachu, a financial adviser, says having control of your money is very important as it marks the start of having good financial habits.

“A good budget helps you overcome mismanagement of resources, which can affect your ability to take your children to school or meet your basic financial needs.”

A budget will help you know which areas you are spending money on and help you avoid overindulging. “One reason why most of us live beyond our means is because we spend money on clothing, cars, luxury goods and binge drinking yet we had not planned for them,” he says.

However, making a budget puts many people off balance. Perhaps this fear is because they do not know where to start.

For you to make a workable budget this year, you need to establish the reason you want it. Let the goal be clear as this will act as your guide and help you live within it.

“If you want to make an effective budget this year, the first thing is to determine how much money you make every day, week or month. To determine this, get your average earnings. Those who are employed need to look at their pay-slips or bank accounts to know how much they make, while those in business can compute to determine what they make,” Ngarachu advises.

Then you must decide the timeframe you need a budget for.

“Although most people prefer making a monthly budget, it can also be short term such as daily or weekly. It can also be long term stretching for half or a whole year,” says Ngarachu.

Most financial experts advise that for successful budgeting, you should keep track of your expenses. Identify the various items you spend your money on and how much. These categories may include food, utility bills, clothing, education, insurance or car maintenance.

“The main reason why you should keep track of your expenses is to enable you know how much you spend on each category. This will also enable you to know the areas you can scale down or up to be able to save your money,” observes Ngarachu.

After establishing the areas you spend on and how much, add them and compare the totals to your income. Is your expenditure below or above your earnings? If the figures are not balancing, adjust accordingly.

“However, you need to be flexible in your budgeting. Budget for emergencies as it is normal for unpredictable expenses to occur, like fixing a broken down car, emergency travel or medical bills.”

In your budget, also remember to set aside some money for a savings account. Such an account can grow over time and other than earning you interest, the money can cushion you in case of a job loss or a calamity.

“Budget for small items and little expenses. Include money for calling cards, buying gifts, bus fare and visiting the salon or the barber, and even money to take care of visitors who at times can stretch your budget. Many easily forget to budget for these categories.”