Budgeting 101: What Are the Basics?
Unless you’re a numbers geek, you probably hate budgeting. However, it’s something all responsible adults have to do, like eating your vegetables.
Loans, Petrol and diesel bills, bills, insurance, and so on all have to be paid, and the best way to make those payments on time each month is to set up a strict budget. A budget also buffers you against a bad personal financial situation, like having to pay for unexpected major car repairs. Keeping to a budget can also prevent you from racking up major debt or running into credit problems.
Every good budgeter starts by figuring out how much cash is coming in and going out. Add up your income for the month and deduct each monthly bill. Next, figure out how much you must spend on groceries, fuel or transportation fares or even car rentals in Ghana. Finally, factor in regular ‘other’ expenses – like fees for the weekly softball game.
This process should give you a good idea of your basic financial expenditures and provide clues to where you could save a few bucks. If it looks like you’re cutting it close – consider eliminating some of those non-essential ‘other’ expenses.
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Include Some Splurging
Instead of trying to ignore the fact that you tend to make impulse buys from time to time, embrace this reality and factor that into your budget. If you have incorporated some impulse spending into your budget, you can do it without getting yourself into financial trouble or feeling guilty later.
Factoring in splurging includes any major purchases you want to make or upcoming vacations. Setting aside a bit of each paycheck means that massive purchase won’t end up on your savings.
Pay Down Debt
Because interest means you’ll be paying more than what shows up on your bill, paying off debt has the effect of saving you money in the future. If you’ve racked up a lot of debt, stop spending on those accounts now. Paying these off will boost your credit score and make it easier to acquire loans for things like a car or house.
If you have multiple debts to pay off, a good strategy is to knock down one at a time with large payments while making smaller payments on other debts. Once one debt has been paid off – you can roll that payment into the next debt you want to take down. A high interest debt can also be tackled by taking advantage of interest-free balance transfer offers from other companies.
Set Aside Savings
In addition to paying down debt, setting aside savings can put you in good financial shape for the future. For savings, determine how much you can afford to stash away each week and when you get paid, put that amount into a separate account.