Given today’s financial situation, many of us are finding ways to save money.  For a start, we can create a personal or household budget to keep track of our income and expenses. The budget will become a useful reference for us to monitor our saving and spending habits.

(1) What is a budget?

A budget is plan of the money you have and how you spend it.

(2) Who needs a budget?

Everyone needs a budget. Even if you are a billionaire, you will still employ an accountant to keep track of your money. Budgeting is an essential first step to improving your personal financial situation.

(3) What is a budget for?

A budget lets you know 

  • How much money you have initially?
  • How much money you are spending?
  • How much money you have left?

(4) So what can a budget do for me?

  • It helps you to set your financial goals.
  • It gives you a focus.
  • It tells you where your expenses are....or where you are leaking money.
  • It helps you decide where to cut your expenses.

Now that you are familiar with the basics of a budget, let's move on to the fundamental budgeting tool - a budget statement. A budget statement can be summed up as follows.

Income - Expenses = Savings (or Debt)

So what do you put under income

  • Salary
  • Allowance
  • Business profits
  • Interest from savings
  • Dividends

And under expenses?

  • Utilities bills
  • Mortgage payment / rent
  • Groceries
  • Things you buy for fun (e.g. movies, clothes, restaurant meals)

At the end of month, check out what you have left. If the income is more than your expenses, congratulations! You have a surplus. You now have some savings!  

On the other hand, if you spend more than you earn, you are now in....debt. 

Steps to write your own budget statement

Step 1: Create two columns.

Step 2: On the left column (which is known as the INCOME column), write down your sources of income and the respective amounts. 

Step 3: Add them up and state the total at the end of the left column.

Step 4: On the right column (which is known as the EXPENSES column), write down the areas where you spend your money and the respective amounts.

Step 5: Add them up and state the total at the end of the right column.

What's next?

1. See which column's total is more. It will tell you whether you have savings or debt at the end of the month.

2. If you wish to increase your savings or reduce your debt, take a closer look at all your expenses. See which of them can be reduced next time. Are they needs or wants?

3. REMEMBER. The more you reduce your expenses, the more saving you will have. The more savings you have, the more your money will grow.

4. Think LONG-TERM.  Creating a personal budget is the first step to improving your financial situation. 

Good luck! 

Grow your money