A budget is key to running a financially responsible business and equally a budget is key to running a financially responsible household. It is irrelevant whether you are a single person living alone or a parent with a large family, or if you are a well remunerated executive or getting by on a students allowance, the fact remains the best way the manage your finances is to know exactly what money is coming in and what money is going out.
Reviewing your budget every few weeks allows you to monitor what money you have coming in against what money you been spent for that period, clearly showing you if these figures are in line with the projected figures you budgeted for at the beginning of the financial year. This approach allows you to adopt a mindful and considered approach to the money you are spending and categorizing what may be viewed as essential such as electricity and car insurance against what expenditure may be seen as a discretionary, such as a choice to enjoy an expensive dinner, buy an item of clothing or for those on a limited budget to decide whether they buy their lunch each day or make their own.
Being mindful of the money we spend allows us to make informed decisions about the choices and lifestyle we want to live both now and into the future. We can choose whether we want to save and travel in 2 years or whether we would prefer to purchase a membership to the AFL Club that we support. Either is fine, but by mapping a budget we can make decisions that we have thought through and provide us with the best use of our funds, without a budget we might simply bounce around from option to option and make decisions that we really haven’t thought through in any detail.
Monitoring the budget we put in place each financial year empowers us to see if our expenses are gradually creeping up in any one area and may prompt us to make that call to the bank to get a better rate on our mortgage or shop around for a better rate on electricity. To be able to accurately detail the income we have coming in to our individual household may inspire us to look at ways that we can increase this amount by perhaps investing in further education or look at the business or job opportunities which could be available to us. Otherwise, a budget can simply give us peace of mind knowing our finances are on track!
One of the many benefits of a budget is that it provides us with a format to think logically and clearly about the ‘business’ of running our households and by dedicating a relatively small amount of time each financial year to set and detail a budget, together with a few moments each fortnight to track income and expenditure, we are providing ourselves with the information that we require to make well thought through everyday financial decisions.
Click on the following link to be inspired by Income Solutions client Wayne Lucas speaking on how he Budgets, the tools he uses and the benefits it has provided: