Budgeting 101: For Dummies

Good morning guys, hope you had a great weekend. Let’s do a crash course on budgeting today. Budgeting is the simple act of setting aside or allotting estimated funds for a given period of time. This definition is simple enough to understand so let’s go with this.

Saving and budgeting come hand in hand, like the Ewa Agoyin woman and the bread seller. Those two cannot be separated (no, I’m not talking about bread and Ewa Agoyin anymore) so it is essential to know the minimum basics of budgeting in order to save properly. When budgeting, there are a few simple steps you need to follow which will help you draw up a simple budget and stick to it. Here we go:

  • One, you should set up three accounts. For the sake of simplicity, I’ll call them your Expenses, Savings and Flexing accounts. Are they self explanatory enough? No? Okay let’s explain briefly. Your Expenses are your bills, your Savings is what you want to keep aside for a rainy day and your Flexing is your spending money. You need three separate accounts for these in order to start budgeting.
  • Two, draw a basic budget worksheet. Don’t get confused by all the numbers thrown around and then fail to budget. Get an excel spreadsheet and write your expenses and income down in different categories . This will help you keep track of the amount spent and saved. Below is an example of what a basic budget worksheet for a beginner should look like.

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  • Three, Be realistic. After drawing up your budget, sorting out your expenses and income, what is left is to know the areas you can trim down to spend less and save more. A budget helps you see clearly the areas you’re lacking at, the unnecessary expenditures and help you hone in on your goals.
  • Finally, keep the plastics away. In this modern, cashless age of swiping credit cards faster than the speed of light, carrying cash around is a sure way of curtailing your spending habits. Holding cash may not be so convenient but you have a visual on how much is being spent and helps you reduce that. Swiping cards to make transactions reduces the impact on you on how much money is being spent but holding cash helps you realize the amount being used daily during transactions.

The goal of budgeting is to establish both short and long term goals and track your progress toward them. The more you budget, the more it becomes easier for you to follow. Set realistic challenges for yourself with new budget.

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