Preparing a budget
Make a conscious decision about how you spend your money. Do it by budegting.
"A budget is a note of where your income comes from; a projection of where you are able to spend and save" said Deborah Vieira, wealth advisor at Stocks and Securities Limited (SSL).
It's not difficult to implement, and it's not just for people with limited funds. Budgeting helps people to make good decisions about how to allocate their money.
When you keep track, you'll know if you're spending too much and spending too little, Vieira said.
"An accurate monthly budget can help ensure you pay your bills on time, have funds to cover unexpected emergencies and achieve your financial goals," said Christopher Yeung, portfolio advisor at Proven Wealth Limited.
So, now that you know what it is, here's how to prepare a budget.
List all your sources of revenue. It could be your wages, bonuses or dividend payments.
Then, list all your fixed expenses. Those are usually set, and are obligatory payments such as rent or loan repayments.
You should also make note of the variable expenses you may incur on a monthly basis. Grocery, fuel, entertainment and gym membership are examples of these.
The difference between the expenses and your revenue is your net income- how much you have to spend.
Since you have some amount of control over variable expenses, Vieira figures you can work around that.
A budget isn't merely about doing calculations. It's about changing certain behaviours.
Consider doing practical things, if you need to go shopping, share a vehicle with a friend, Vieira said. "That will help to cut your spend on fuel."
If you decide to use your own vehicle, consider shopping in an area that has most of the stores you need, she said.
Budgets can be done to suit each individual; some persons make mental notes, but Sigourney Hitchins from Mayberry Investment advises that you put it in writing.
"That way it helps you to analyse your spending patterns," she said.
What's more, a budget should be updated regularly because as expenses decrease or rise.
Track all your expenses, even the little ones, they add up.
Never underestimate or overestimate your revenue or expenditure, Yeung said.
SSL's Vieira added that seeing the numbers can also put you in the direction of cutting unnecessary expenses.
For example, if you decide to set aside a certain amount when an emergency comes up, you'll immediately know which expense you can cut back on, said the wealth advisor.
"You make a budget to give allowance to deal with emergencies," said Hitchins.
As soon as your expenses are taken from your income, you'll know how much is left over and what can go towards savings and investments, she said.
When a person goes over their budget, they tend to cut back on their expenses. Though that could work, supplementing your income is also an option.
"Make use of your hobbies," Hitchins said. "If you enjoy cooking, you could perhaps do part-time catering."
Budgets can be done to suit each individual; some persons make mental notes, but Hitchins advised that you have it in writing.
"That way it helps you to visualise where your money goes," she said.