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| Image credited to George Dagerotip |
Welcome to the InvestmentforBusiness in this blog post. I hope you enjoy our last pieces on investment matters? In this blog post, we will cover you with:
- What is a Budget?
- Why is a Budget important?
- How to Budget Money Monthly for Beginners on Five Normal Categories
- 10 Effective Tips For Creating A Budget That works for you
Discover how to budget money for beginners? That is where I come in. You need to learn how to create a budget skillfully through this rich information that will work for you.
What is a budget?
A budget can be defined as a summary of what expenditures you want to spend on or shop for personal or domestic or business needs and how much it cost you you to spend or shop around. It is called a calculated plan.
A budget lets you to consider carefully what things you want to buy for your personal use or your family needs at home and how much it cost you to spend on. A budget is a detailed plan. It is only for a spending, saving and giving plan
And Government know how relevant a budget is because if they want to allocate money for public project or disburse money for particular purpose, they must have a ‘money’ (or annual) budget.
A ‘money’ budget is a system that will help you keep track of between your living expenses and your monthly income. And also It will control you from spending more than what you earn and will economize your spendings and reduce your expenses if you can not meet them with that money.
Money is very volatile because today you have millions in your pocket and tomorrow you find yourself financially drained and ask yourself, ‘Where has my money gone? and who drains my money?’
You don't know where your money has gone and who steals my full money. Money is a wing and it can escape any time if you don't control it. If you want to manager winged money, you must have a written budget on between expenses and income and it will save you and allow you flow more cash in your pocket.
Budgeting is good because it helps control our wanting to buy everything we can see in the shop some where. It can help us to plan and pay our bills on time. And it helps us to remove some unnecessary expenses or some expenses if we can not meet them with our money.
And also it can help us to live below or within our income and allow us to save more money if we use financial analysis where our money has gone and come. It is called money management.
Why A Budget is Important?
Because:
1. It can prevent pilferers from eating up your business profits if you use financial records in analysis.
2. It can protect your money from spending money on things indeliberately.
3. It will open your eyes to see why your expenses are more than your income.
4. It will remind you of one or more things if you miss or forget it.
5. It will help you to buy everything for your business or your personal/domestic use without losing more money or confusing your mind.
6. It helps economizes your spendings if you know you have low income.
7. It helps evaluate how much you spend and what things you want to shop.
8. It helps record who customers are, what exact things they want you to do it and how many numbers they want you to provide them and then plan it successfully.
9. It helps estimate where you spent in the last months ago or it helps compare with your last spendings in the months or in the last years if you file it for future analysis to know how much you spend more or less.
10. It helps you to cut back some of the living expenses if it is more than your income.
How to Budget Money Monthly for Beginners on Five Normal Categories
Let me explain to you as an example in calculation. Imagine your salary is $ 20,000 and the budgeting rule is 10/30/60.
30% is for your financial goals and 60% is for your living expenses daily and 10% is for taxes maybe.
Calculation:
Category 1: 20% on Self
It means you will pay yourself 20% of your salary/income first daily.
Now, 20% on $20,000 is: 20 × $20,000 ÷ 100% = $4,000
$20,000 - $4000 = $16,000
Category 2: 10% on Emergency Fund
It means you need to create an Emergency Fund in your another bank account for future time.
Now, 10% on $16,000 is: 10 × $16,000 ÷ 100= $1,600
$16,000 - $1,600 = $14,400
Category 3: 10% on Taxes
It means you may pay a tax ($1440) to government if required strictly.
Now, 10% on $14,400 is: 10 × $14,400÷ 100= $1440
$14400 - $1440= $12,960
Note: If you do not want to pay a tax because it is too much or avoid it, I recommend you to look for tax expert or to learn how to take advantage of tax
Category 4: 5% or 10% on debt
It means you will pay off your 5% or 10% of your ($12,960) salary to some people if you know you had owed them in the old time or the new time. And I won't go into this calculatuon.
Category 5: 60% on Living Expenses
It means you will live on 60% of your $12,960 salary in your personal management carefully until the next month. It means it ensures you don't have to owe people. But if you owe people, it means you will live on 55% or 50% on living expenses because you will pay off 10% or 5% of your choice to them if both agreed.
Now, 60% on $12,960 is: 60 × $12,960 ÷ 100 = $7,776
$12,960 - $7,776 = $5,184
It means you will spend $7,776 on living expenses monthly carefully, leaving surplus of $5,184 in your third bank account for future business or future investment or future property purchase if you add the monthly surplus faithfully every month.
And however, It means you need to budget (control) $7,776 on living expenses wisely. It is called financial discipline if you want financial independence in the future.
No matter how small or much your salary is, never lend money to any person even your best friend if you know you can not afford to lose it.
10 Effective Tips For Creating A Budget That works for you
Step 1: Determine what expenses you want to spend or shop.
Step 2: Get a piece of paper with a pen.
Step 3: Detail all your needs for personal/domestic/business use. And determine how many units you want to spend or shop.
Step 4: Just guess how much it costs you and record it wisely or as a test.
Step 5: Then record the cost each time you shop around as a test.
Step 6: Cut back some expenses if you can not meet them with your money.
Step 7: Look for a discount before you buy or buy in bulk at wholesaling price. It will save you more.
Step 8: Keep a filed budget for financial analysis in comparison on your last spendings.
Step 9: Don't give a person money for shopping or spending until a detailed budget is brought out to you. And it helps you know the costs.
Step 10: You need to raise your income over living expenses or add more streams of income to protect your monthly income from being drained by the inflation of living expenses.
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The Best Ways to Pay Off Debt Faster Even When You Have Low Income
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