What is a Budget?
Budgets are a plan for future income and expenses and to manage cash flow. The budget
essentially provides a guide to assist you in making wise financial decisions by listing all
anticipated cash inflows and outflows.
Why Do You Need A Budget?
How often have you withdrawn money from an ATM without realizing you had performed so until spending it all up in a day or two? Most of the time, we have a hard time remembering where the money went.
Many people typically do not keep track of their costs and spend more than they earn. This is the reason why budgeting is important.
The Benefits Of Budgeting
● Budget-friendly living
● Boost saving habits
● Saving for financial emergencies
● Enhance the property’s net worth
Living Within Affordability
Needs And Desires
The budget is based on income and expenses. Budgets should be based on your needs and desires as they vary by individual.
So how do you distinguish between desire and need?
Needs are something you need to have and cannot live without while desire is something you want but not necessary.
These are a few examples of needs and desire items.
| Needs | Desires |
|---|---|
| Food | Dining in high-end restaurants |
| Residence | Luxury bungalow |
| Clothing | Branded clothing |
| Quality time with family | Vacation abroad |
| Car or motorcycle | Luxury car |
| Mobile phone | Advanced mobile phone |
| Computer | Advanced computer |
Your basic requirements have evolved through time and now include more than just food,
shelter, and clothing. A person’s desire from today will likely be needed by him tomorrow.
For instance, a mobile phone has not been a requirement for a person in the last 20 years.
On the other hand, mobile phones are no longer seen as a luxury in modern society but rather as a need. Making choices between needs and desires will significantly affect your costs.
Postpone Will
Postpone the will means postponing your desire to another time. Always consider your finances before making a purchase, especially if it’s an impulse buy. Saying no to a needless expense is a key skill for living within your budget. Find a different option for your needs and desires if something is outside of your budget.
Have you ever thought of the following questions before purchasing?
● Instead of buying a car, why not just use public transport?
● Can you think about getting a secondhand car if you truly need one?
● Is a standard type of computer or mobile phone sufficient if you require one?
● Can you get a similar, higher-quality dress at a more reasonable price if you don’t want a
branded name instead?
Realistic budgets account for the financial condition and necessary expenditures. Living on a budget does not mean that you have to sacrifice all your luxury. You just have to plan better and change perceptions and your spending habits.
Shop Wisely
The key to developing a successful budget is to spend less than you earn. Wait for a while
before making a purchase decision, then ask yourself these questions:
● Can I afford to buy it?
● Do I need it?
● Is there a cheaper one?
● Can I postpone the purchase?
Shopping Suggestions
Time
- Design a purchase to avoid going out many times just to buy some goods.
- Use existing sources, preferably including petrol and time.
- Avoid last-minute purchases.
– Purchase and stock up on essentials before the festive season to prevent price spikes.
Make A List
- Make a list of everything you want to buy
- Avoid buying unnecessary items
- Make a purchase that fits within your budget
Make Comparison
- Compare prices before purchasing an item
- Save a “price list book” to track frequently purchased items’ prices
