Budgeting for Better Money Management

So you want more money, but how will you get it? The answer to this question may be as simple or as difficult (you decide) as developing better money management skills. Learning to effectively manage your financial resources is in fact, a crucial step to wealth creation and achieving your goals. A budget is not just something for the concern of government fiscal planners but is also integral for the average income earner who may ignore this task to his financial detriment.

According to The Oxford Dictionary: A budget is an ‘estimate of revenue and expenditure; amount of money required or available.’ Simply put, a budget captures all income earned and money spent or needed to be spent over a particular period.

How to Make a Budget

Create a list of all that you earn for a month including money from sources outside your regular job like rental or hobbies. Also make a detailed list of what you spend by categorizing bills, food, transportation, entertainment, child-support etc. With a total estimate of money earned and spent, subtract the latter from the first to see how you are really living! Have you set any money aside for saving or investment?

Benefits of Budgeting

Determines Real Economic Status:

A budget will force you to take truthful stock of your financial status however good or bad and will bring bad spending habits to light for correction. Are you trying to keep up with the Jones’ or appearing to be something you are not?

Enables Assessment of Needs:

Are you earning enough? Do you need to supplement your income or are you living above your means? Your budget will tell you where the gaps are that need to be filled. Maybe, getting another credit card at this time is not such a good idea.

Allows for Goal Setting:

When you have determined your real financial position and assessed what the problems are, your budget will help you to decide what is needed to be done for the short, medium and long term in order to achieve your financial goals. Set some objectives based on priority and place these within time lines.

A budget is a personal thing that’s unique to each individual’s lifestyle and objectives and no two individuals even with similar incomes will have the same requirements for successful living. An honest look at your spending habits and income needs through budgeting will prove beneficial to anyone who wants to more effectively manage their money and better prepare for the future.

Shawn Thomas