First things first, what actually is a budget? A budget consists in comparing what you receive in money (‘cash in’) compared to what you spend (‘cash out’). The goal of a budget is to make sure that what goes out DOES NOT exceed what comes in (otherwise your bank account is negative).
Which leads us to our next question; how do we that? How to make sure that the ‘cash in’ is bigger or at least equal to your ‘cash out’ ? One big tip is to ask yourself, do I really need to buy this stuff? For example, buying food in the store, paying your rental, paying your transport to go to school or to work. These are called primary needs (they are essential for your living). Next to these, you will have what we call secondary needs (e.g. go to the hairdresser’s, buy fashionable clothes or alcoholic drinks) for which you need to ask yourself, do I really need them or can I wait until I have more money?
Being able to distinguish primary (essential ) from secondary (nice to have) needs is the key to successfully budgeting and ensuring you have money in your account at the end of the week (or month).
So next time you want to buy something, ask yourself 2 questions :
- Do I really need to buy it. Or can I wait till next time when I have enough money to pay for it ?
- Is the cash in my account bigger than what I have to spend? If not can I postpone that purchase ?
So make sure to grab a piece of paper and pen and write down how much money you get in a week or month. Then start listing your primary needs like rent, food, medical aid etc. Put a price for each of these to help you see how much they all come to. After you have done this you will be able to see how much money you have for secondary needs. These include things like going out. clothes etc. Try and be honest with yourself and also make plans for any future purchases you may want to make. Things like saving for a car or house or even just saving for a rainy day.