Most of us when we hear this term we tend to relate it to a company’s operations or to a business or investment or the government July budget reading, anything other than our normal daily life, right?
Well, allow us to highlight a very important approach of this very beautiful word.
Conventionally a budget is an estimate of the revenues and expenses over a specified future period of time and is usually compiled and re-evaluated periodically.
We aren’t disregarding this definition. All we want to do is give a more relational definition of the same term.
A personal budget is simply a life plan or project plan or investment plan. A personal budget is basically a financial plan that should enable someone to be able to run smoothly in matters of finances.
There’s an old saying that states “have a plan because not having a plan is planning to fail” well it’s from this basis that we derive our argument, a budget is a basic necessity if you ever want to enjoy financial freedom.
The joy that comes with not worrying where resources will come from to satisfy all the needs and wants that we have in life cannot be quantified. Now for you to experience this freedom you need to plan, it doesn’t just fall on our laps.
We always like to argue that it’s not the wealthiest that continues to be wealthy, but the wealthy that have a plan on how to keep multiplying their wealth that will continue to be wealthy.
Having a budget does not in any way mean that you deny yourself all the good time that life has to offer, not at all.
If you look at a budget from this angle you’ll most definitely never have one, all the same way, not having a budget doesn’t mean overindulge or live beyond your means.
Having a budget is basically having a plan of how to spend our resources when to spend what, and how much to spend, how much to save, invest, or both.
Having explained our argument now allow us to share some insights that will guide you in coming up with a very simple custom made a budget that will fit your lifestyle.
We’ll explain this in order of steps;
Start by listing all the resources with the exact amount that you expect to receive. If some are business generated and the variables involved in generating the inflow are not predictable hence resources generated aren’t predictable as well, not to worry just list it, then project on what you expect (this projection should be based on previous performances & always project on the lower side, not because we hope not to generate more money but because it better to have a surplus income than a deficit).
Estimate a % that will go in savings.
List all the recurrent permanent expenses with the amounts.
List the once in a while expenses with known amounts, for the ones that you may not be aware of the exact amount, estimate on the higher side (this is vise versa of the income because you don’t want to under budget)
Here’s a simple sample of how the above should look;
In next week’s issue, we will try and explain this template budget and why those expenses are arranged like that. Now in the fortunate case that you have a surplus you’ve got two choices: you can save it up for a rainy day or invest in another income-generating venture, & once in a while use the surplus to give yourself a special treat.
Mbugua & Associates.