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The pressure is on. Mortgage interest rates are rising, food prices are increasing, fuel costs are sky-rocketing – yet income levels are stagnating. Never before has it been so difficult to eke out a living. Managing the financial livelihood of your household can be a real challenge. Yet, it is a challenge that can be met – not necessarily by bringing more money into the home – but, rather by properly managing what already comes in. The key is money management.

At school we are taught nothing about money management. As a result many otherwise successful people are hopelessly at odds with their finances. Budgeting, though, is relatively easy to learn. It involves 3 simple steps: making a list of income, a list of expenses, and then keeping the expenses within the income. Lets take a look at these steps individually:

(1) Income – For most of us making a list of income is relatively easy – wages, interest, dividends. Exclude all income that is uncertain such as over-time pay or bonuses. Relying on this income may get you into real trouble if it does not materialise. If it does come, use it to treat yourself and family.
(2) Expenses – It is often difficult to see just where our hard-earned money goes. You might benefit by carrying a note book around with you and jotting down every cent you spend over that period of time. This will help you to locate any ‘mystery money’ that seems to slip away each week. Next you should make up a monthly expenditure chart. Use main headings such as ‘housing’, ‘food’ and ‘clothing.’ Make the chart reflect your individuality and preferences. Don’t forget periodic payments such as insurance and taxes. You should also allocate a certain amount for emergencies and don’t neglect savings. Budgeting experts suggest putting aside a minimum of 5 % of your after tax income for savings. The ideal situation would be to have a savings cushion that will see through six months of possible future unemployment. You should have a column in your chart entitled ‘Essential?’. Here you can go down the list and enter either a ‘Y’ or ‘N’ as to whether the item is essential. You may have to be ruthless here in order to keep within your income level.
(3) Keeping within Budget – To make your budget work will require real discipline. It will also require cooperation between family members. It is important too that your budget be realistic – you should have provision for occasional entertainment, for example. Doing so will motivate to stay on track with your financial plan.

Without a financial plan it is virtually impossible to keep our heads above water. By implementing the simple steps out-lined above, however, you will be able to successfully mange your money. So, get money wise – get a budget!