Budget is not a certain amount of money that you can live on per month or per year. Your needs are needs and however little your salary, it is imperative that your basic survival needs are met.
Budget is the step up after your needs. It is a sort of allowance that you must not exceed in order to make your money last longer, to survive within certain comfort during a certain period of time and to divide them in parts to fit your financial goals. For example when you need to save for various things and it is necessary to allocate a specific amount to each of them. Also toys/activities when it comes to children or presents for social dos, friends and family, etc.
In a previous article we discussed what our needs are. Lets have a brief reminder again as to what these are.
- Clothes for work and weather
- Transport to work
- Health and medicine
- Phone (Remember that the phone can be a necessity for safety, for you and your family, and also imperative to get a job and/or to maintain it, and to communicate with family members)
Once your needs have been met, whatever money is now left you can put it aside for a rainy day or towards something major you’d love to purchase without having to take a loan first. Here is when the actual budgeting begins. When you allocate your leftover monies for various saving purposes then you start entering the budgeting matrix. The purpose or goal can vary and can be things such as a house, a piece of land, a car, to start a business etc.
Budgeting can help very much with the plain survival. Once the needs have been met, we can then manage our foreseeable needs even better. The examples given below are only a tiny fraction of what can be done. With creativity and long term habits a lot can be achieved.
Let’s say you covered your needs for this month and you are left with $400, or €400 or £400. It doesn’t matter what the currency is here, only the number itself. There is a whole lot you could do with this money. You could stock on long lasting groceries in your house, groceries that you found on sale very cheap or simply you buy in big amounts because it is costly to make frequent grocery trips. With the little money you have left over you can stock as much as your wallet can take and use over time till you run out. It can be tomato paste or sauce, it can be pasta etc. Meat could easily go under this category if it is possible for you to freeze. If you usually buy 1 kilo of meat a week for your family, but you found down prized meat that your family eats, then you can buy 10 kilos of the said meat, divide it in ten portions and freeze it. Next time you’ll be in need for meat you won’t have to buy it full prize. You will have spent less on your needs and you can save this small amount of money aside.
- You can buy in bulk things you use regularly, mostly food. When buying in bulk it is usually cheaper. Non-foods that I can think off right now and is common for my area, is wood for the winter (stove/fire place), linen for the house, underwear, soaps, detergents and the like. Food that can be bought in bulk is flour, lentils, beans, rice etc. They can usually be bought by the sack. Oil in big containers, cheese in similar containers and so on. This way, your basic need of feeding yourself will be less costly and so the money you’ll be able to save will be more.
- Next month you’ll be able to save $430 (€, £), instead of only $400 because your needs will cost less because there’ll be more in your pantry. Or you could use the excess money you saved towards wants to not feel less privileged in case you are new to personal financial management, aka savings, and still suffer from the transition. There are many steps to personal finances, budgeting and savings, and it takes a strong mindset. But fear not, everyone can develop financial sense over time, all you need is a personal why and time to adjust. The financial enlightenment will follow.
Some people use budgeting in a very simple yet very productive way. They say their income is $800. Now it is January. By December they want to have $1000 saved to go for a skiing vacation. That gives them 11 months to save this money. Which means they take the amount they require to save ($1000) divided by the time they have (11 months) and end up with the amazing amount of $91 which they have to save each month in order to have acquired their desired savings by December 1st.
They don’t put restrictions as to what they are going to do with the rest of their money and how they are going to distribute it in relations to their needs or overall wants. They want to go on vacation in December and that’s all that matters. They are content to put aside this amount monthly and keep it simple.
Everybody has their own strategy. Use whatever works for you.