What does it mean to manage a budget? Budget is a simple tool that makes it easy for you to keep track of the money coming in and out of your pocket and balancing the things you must and want to buy with the desire to save. In budget management the intention is to maintain a balanced budget and plan so that expenses are lower than revenues.
Who is it for?
Budget management is suitable for everyone: for teenagers who have just opened a bank account, for soldiers and national service members who earn a military salary, for students who have left home and are dealing with independent household management for the first time, for a young couple learning about the advantages and disadvantages of joint account management. Retirement planning their life routine in retirement. Budget management is a relevant skill in any life situation, as we all use and manage using money on a daily basis. For example, perhaps you need to call out emergency plumbing services, or you need a new fridge/freezer. These things can set you back.
When should you use it?
Budget management is very useful in the daily routine. There are also many expenses that we do not take into account at all, such as weddings of relatives or buying holiday gifts. These are all expenses that should be part of your monthly budget.
Apart from the routine, budget management can be especially helpful in anticipation of the occurrence of large events such as a wedding, a new home, the birth of a child or the purchase of an apartment. Managing your budget will also help you to save for retirement, so you’ll be better able to pay for things like a home care agency. Each of these events brings with it apart from great joy, especially many expenses that need to be planned in advance, set priorities, consult with experienced people, think of cheaper alternatives and make sure that the expenses at the end of the day do not exceed the income.
Tips to help you
Write down all your expenses and income now and in the future. Write down every expense you spend today, a future expense that you have already committed to and any goal you want to accomplish and involves money, whether you started saving for it or not.
- Examine your priorities: Rank the expenses according to the degree of urgency and the degree of importance in your eyes. There are expenses that cannot be completely waived such as living expenses (food, electricity, water) and liabilities (something you bought in installments). Examine the rest of the expenses – what can be reduced, postponed and what can be given up completely in order to fulfill an important goal in your eyes and meet the income limit?
- Set a maximum amount for each expense: It is advisable to start by setting an amount for each of the necessary expenses (living expenses, debt repayments), continue by allocating amounts to expenses that you have defined as more important and the rest of the expenses. At each stage after you have decided how much money to allocate to each type of expense, think about how much you have left over for the other expenses.