What is a budget? A budget is a plan to manage your money, by balancing spending with income. It also provides a means of controlling your financial position. In order to be effective, a budget should always be realistic and attainable.
Creating a Budget:
Remember to keep budget making simple – Take a piece of paper and make 2 columns. In column 1 list your monthly income. Sources of income include; salary/wages, pension, rental income, interest income, dividends, bonuses, child support, other income. In Column 2 list your monthly expenses. Expenses include; tithes/offerings, mortgage/rent, other loan payments, utility payments, vehicle expenses, household expenses, savings, miscellaneous expenses, etc.
For some people income, as well as some expenses, varies each month. For the purpose of budgeting use an average. Remember a budget is simply a guideline and may not match actual spending each month. (eg: expense for electricity does not remain constant each month).
Be sure to list all sources of income and all monthly expenses. You may have expenses or sources of income that have not been listed here! Add both columns and subtract column 2 from column 1. If the total in column 2 exceeds the total in column 1 – you are spending more than you make. You can correct this by reducing spending in some areas.
Budgeting Tips:
Don’t Forget Hidden Debts: These include bills that are paid annually (eg car insurance). If your annual expense for car insurance is ,500, you should set aside 5 per month for the expense.
Plan Gift Giving: Gift purchases should be a part of the budget. Consider the amount of money you spend on gifts annually and divide this amount by 12 to establish the monthly expense. Set this amount aside for gift purchases.
Develop Good Records: Balance your checkbook and keep good financial records. It is not beneficial to plan a budget and then not follow through with it. Record all checks issued and deposits made and compare them to your bank statements every month.
Watch Miscellaneous Spending: Most times, people can’t figure out where their money has gone; often the answer is quite simple – miscellaneous spending. This is one area where people often overspend their budget.
Control Impulse Spending: Impulse items are things you want but don’t need and credit cards are a primary means of buying impulse items.
Reduce Debt: List your debts and work on reducing them. Stick to your priorities – you may have to sacrifice to balance your budget and reduce debt.
Set Personal/Family Goals: The minimum objective of any budget should be to meet the person’s or the family’s needs without creating further debt. This may involve a family financial sacrifice. Without a willingness to sacrifice and establish discipline, the budget will not succeed. As much as possible, get the children involved in the budgeting exercise.
Balancing Your Checkbook - You can find instructions on the reverse side of your bank statement to help you balance your checkbook – Always use this Reconciliation Report to make sure that your checkbook balances with the statement.
Only you can control your personal finances and better your financial position. Educate yourself, start a savings program, establish goals, invest towards your future.
Remember: It is essential that you become the master of your money and use it wisely. No matter your income, you can take control of your spending, create some savings and plan for your future.
You may collect a personal monthly budget form and information leaflet at our office:
Caribbean Commercial Bank, 1 St Mary’s Street, The Valley, Anguilla
If you need help or further information, feel free to contact us at 497-2571 or email: vanessac@ccb.ai.
Look out for PART III
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Author
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To find out more about author Vanessa Connor, click her picture.
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