The defining factor in reaching your financial goals lies in your Budgeting Skills. Like building an infrastructure, the more solid and concrete the budget, the farther and higher you can go.
BusinessDictionary defines Budget as “an estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.” Basically it is a quick overview of what you have, how you are going to allocate it, and what you wish to have in the future.
A budget is also a reflection of your goals and your priorities. It speaks about what and who matters to you too.
That is why it is essential that you pay extra time and attention to it. While some are great at creating their budget, some find it difficult to maintain it. So how does one become skillful in Budgeting?
The Three Rs in Mastering Your Budget
Record. Decide where you are comfortable – an excel sheet or in a notebook. On one hand, some people find that an excel sheet is easier for tracking and computation. On the other hand, some people find the feel of writing in a notebook better. Whatever you choose, make sure it is something you are comfortable with.
Details are everything. The more you specifically identify where your money goes, the better you will be able to control your money. First thing to do is create your Major Categories – it could be Personal, Savings, Investment, Health, House, Transportation, and Miscellaneous Categories. Under your Personal Category, you may include Allowance, Material Fund (this is for you to learn how to save up for what you want in the future) and Tithes. And under your Savings Category, you may write Retirement Fund, Emergency Fund, Holiday Fund and Little One Fund (if you are planning to have a kid in the future). You can tailor-fit according to how you want it.
Decide a date in the month when you are going to sit down and budget. The key is to create a habit of budgeting regularly. You might want to budget as soon as your pay slip comes out or when you finally get your salary.
Review. Track yourself regularly. Look at your budget and see how you are doing. This will keep you in check. Also, this will remind you of your goals especially when you feel like spending more than what you allocated. Are you now almost about to finish your Leisure Fund? Maybe inviting your friends over and cooking dinner in your flat instead is better than dining out in a restaurant.
Get inspiration from your Budget when you need to. Since your budget will include your goals such as Investment Fund for a house/condo or Holiday Fund for your next vacation, this will keep you going knowing that you are controlling your money for something greater.
Revise. Feel free to make adjustments. A budget is not set in stone. If you find that you would like to decrease a certain fund in order to increase the other, do so. If you feel like adding a certain category, go ahead. It’s all about designing how you want your financial to be.
Your budget evolves. Our circumstances change. You might get married one day or decide to have your second child. You might decide to move to another country or go back home. All these changes mean your budget will change too. And that’s okay. So feel free to sit down and redesign it.
Record, Review, and Revise. Let these Three Rs guide you in honing your budgeting skills. It’s okay if you find yourself sliding off or not being able to stick to your budget in your first few tries. No one said it was going to be easy. The most important thing is that you try your best every time. So just keep on recording, keep reviewing and revise when needed. You are architecting the life you want to live. So just keep going.