A budget is a means of highlighting your income and spending pattern for a specific period. In recent times, I have been thinking about my spending pattern. I realised something crucial, I had veered off in many ways from my monthly budget, much more than I had since I started budgeting.
On further reflection, I realized I had been doing some things differently. I was not taking out adequate time to plan and write out my budget which usually led to me leaving out expenses that were required and not pricing an item or event adequately (usually estimating a lesser figure).
I also realized that I was spending more and having to settle things that were more or less relevant but not included in my budget. This can be frustrating especially when you find yourself with little or no money before the month ends.
Have you had a similar experience or are you yet to consider budgeting as a means of managing your finances? If your answer to either of the two questions is in the affirmative, then here are five useful tips that I have used, which can steer you to better budgeting:
1. Timing
You need to take out time in the current month to plan your budget for the following month
Rather than scrambling to write out my budget at the tail end of the current month, I have gone back to my former method of organising my accounts, income and expenses in the 2nd week of the current month. This gives me sufficient time to make any changes and adjust in line with my recurrent and one off income/expenditure.
Your circumstances, however unique will affect your timing in one way or the other. For families, those with complex payment patterns (eg debt, mortgages amongst others), you will need sufficient time to plan out your budget. There is no doubt that use of budgeting apps or even your Microsoft Excel spreadsheets helps to lessen the burden of documenting your finances. Whichever mode you prefer, the important thing is that you do write it down! That is, you have to work towards creating a comprehensive budget that works for you.
2. You thought Process
Think through each line item
Each line item in your budget should mean something to you. It could be the type of food you buy, the clothes and accessories, the services you require amongst others. I would always reiterate that you don’t include items just because you think that’s what should be in a budget or that is what your friend or colleague includes in theirs. Think through the items you include in your budget.
For instance, the items included may be different depending on the time of the year. Different items are needed during the festive seasons or for weather purposes. You are likely to spend more on cooling during the hot months and vice versa.
3. Research
Do your research to ensure you have the current costs of your expected expenses.
A part of thinking through each item in your budget is also determining the price. You may not always have an exact figure as prices may fluctuate before the relevant period but it is always useful to have a figure that closely matches your actual costs. This would usually require you to do some research. Whether it pertains to your grocery shopping, clothing, home appliances and even services. Some of these costs are dependent on seasons and availability of the products and services.
4. Your Income
Don’t forget the income aspect of your budget
For many of us, when creating a budget there is more emphasis on the expenses aspect on not enough on the income aspect. This may be because the income is usually the same, whether from paid employment or some other typical source of income. But some time spent considering this aspect could be a catalyst to propel you into seeking other sources of income or seeking a promotion or raise if in paid employment. For me, whenever I look at my income side, I feel it is too stagnant and try to think up new ways to generate income. This could inspire you to start a side business and consider ways to grow that business.
5. Execution is Key
Remember to follow through and note any changes that need to be made or have been made for future reference
So, you have hopefully created a comprehensive budget which reflects a more accurate picture of your current financial health and your usual cost and expenses, it is important that you follow through with your budget. Writing a budget is one thing but following through by instilling discipline and self-control is quite another. Of course, there may be a need to be flexible. This is a term that I call ‘rigid flexibility’. You are basically rigid enough to follow through with what you have set out for that month but flexible enough to change your plans where something fundamental occurs or a one-off event that could not have been planned for but is absolutely necessary.
There is no doubt that budgeting is a relevant tool in ensuring better financial management and can provide a clear road map on achieving your current and future goals.
Do remember these five useful tips when next you are battling with that pesky budget. After all, your budget should work for you and not the other way around.
I would like to know more about your spending patterns. Are you like me? Generally following your budget but with major hiccups in the last few months. Have you wondered what has caused this? Please share your thoughts.
Chioma Oparadike
