Budget first.

People are always posting on social media that they don’t have any money left over to save or invest at the end of each month. The thing is, many of them haven’t taken the time to draw up a budget.

So let me point out the obvious: It’s not possible to know with absolute certainty that you don’t have enough money to save if you don’t know exactly what your incomes and expenses are.

That ex you avoid at all costs…

Budgets are like that ex, you know the one you try to avoid at all costs. Budgets can be a constant reminder of past mistakes and empty promises. A mirror of all your negative spending habits and debts. The foundation for getting your financial life in order starts with the creation of your budget.

Yes, that dreaded B word. The task of drawing up a budget may be daunting for some but the benefits will make it worthwhile.

Budgeting will help you to prioritize your spending, to better spread your money over the month and to identify places where you can cut down. Without a budget, you’re more likely to dig yourself into a deeper debt hole each month, without putting anything away for a rainy day.

The basics.

Budgeting is the process of creating a plan to spend your money. This spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. It takes your fixed costs (those which stay the same each month), variable costs (those which fluctuate each month, depending on spending behaviour) and your disposable income into account.

Fixed costs may include things like your rent or mortgage, car financing, insurance premiums and school fees. What you spend on a day-to-day basis forms part of your variable costs and includes things like petrol, clothing, data and entertainment. This is where you can initially start cutting down costs.

Your disposable income is what you have left once you have paid all your fixed costs. Quickly scanning a 3-month bank statement can help you to identify these costs initially.

Where to start?

There are various ways that you can go about drawing up a budget. You can keep things old school by writing your budget down or create something more detailed on an excel spreadsheet.

The favourable option is to use a variety of awesome online tools that will help you budget and track your spending, which significantly reduces your personal admin. 22seven is one of these tools that I use.

So what’s the big deal?

The B word isn’t so scary. The point is that you need to be more conscious of where your money goes and how you spend it. You need to start seeing your money differently while making it work for you. Your spending habits are a major determinant of your financial wellbeing, not just your salary.

You have to ensure that your income is greater than your expenses, leaving you with a positive balance each month. You can then use that positive balance to pay off your debt, save, invest and live a little.

To be more conscious of your spending habits, you have to create a budget. There is no quick fix to getting your s#@t together financially, but creating a budget is taking the first major step.

Be sure to check out the Youth Money Circle website for more.

Youth Money Circle