Budgeting

There are many reasons why it’s important to budget especially if you don't know what happens to your money by the end of the month. This is why you should budget:

Budgeting helps differentiate between priorities (needs vs wants), enabling informed decision-making.

• Budget is an important tool for getting out of debt by enabling one to focus on repaying loans.

• Budgeting also prioritizes saving for your goals.

Steps in budgeting:

• Identify all your sources of income, whether it comes from a salary, your side hustle, interest, return on investments or your family.

• Figure out how much you are currently spending:

• Fixed payments or non–variable expenses that do not change every month e.g rent.

• Variable expenses depend on how much you buy or use a service. eg. electricity

• Classifying and adjust your expenses. This step is vital because you want to know how much you are spending on major categories. The recommended 50/20/30 budgeting formula means allocating:

• 50% of for fixed expenses ; Deduct monthly expenses from your net income. Having all your debit orders come off early will make it easier for you to see how much you actually have left to spend.

• 30% for flexible and emergency costs

• 20% going towards saving; Have all transfers from your current account to your savings account scheduled to go off on pay day with the rest of your expenses.

• If the total expenses exceed income, revise the budget and look for ways to cut on expenses

• Monitor your actual expenses against your budget.