How to get rich on a budget: Budgeting efficiently and diligently can give you the financial freedom that you have been yearning for this year. It will not only help you manage your costs and expenses, but assist you in meeting your saving objectives. Take a look at how you should budget your money this year.
How much do you make and spend: This is your first step. You must sit down and tabulate the exact figure you make, then contrast it against how much you spend and what you spend it on. Elizabeth Nyayieka, a business mentor and financial markets analyst says that failure to know how much you make and spend is the reason why persons who earn six figure salaries end up running broke before end month. “How well or bad do you spend what you earn? You could be making more money, but creating little wealth while someone else could be making much less but creating more wealth,” she says. Ms. Nyayieka recommends that you take one month during which you should spend your money as you previously have, then record where every shilling goes. “This will give you a realistic picture of where your money goes, and will help you cut off unnecessary allocations,” she says.
Value of your purchases: Paul Morris, an entrepreneur and the author of Wealth Can’t Wait says that for your budgeting to work, you must allocate value in whatever you choose to buy. “You must be aware of where you are in your wealth vision. Once you identify this, you must be radically honest on how a particular purchase will affect your journey,” he says. You can tell this by identifying the exact value you will derive from a purchase and how it measures in comparison to a saving or another purchase. “Your purchase must not jeopardize your goals. Before you spend, always ask yourself, ‘How can I recreate a purchase to make it serve me better and develop my financial position?’” he says.
Long-term goals: These goals include retirement and acquisition of assets such as a house, or paying off your debts. “Your long term goals must be backed up by a vision of where you want your income, savings, investments, and expenses to be over different periods in your life,” says Mr. Morris. For example, Forbes, a global financial journal, recommends that if your goal is to pay off your debts, you must ensure that the dedicated percentage meets your minimum monthly installments. “It will be wiser if it is much more so that you can dedicate an amount to accelerate your installments by adding more to the amount that goes to paying off your principal,” says Forbes.
Enterprise budgeting: Budgeting does not end with personal money. If you are in business, you must also have a plan in place to help you budget for your business. Sean Smith, the author of Finance for the Young Investorsays that you must figure out your business costs and separate your personal and business money. “The size of the business or model on which it operates do not matter. You must figure out your business expenses. These must include fixed costs such as rent and variable costs such as marketing,” he says. Once you have the total cost, separate business and personal money. “This will help you know if the business is making money or not, and which costs need to be cut off,” says Mr. Smith.