Where does one start? How does one go about setting up a functioning budget? How does one live within one’s budget? You might be asking these questions as you monthly scrabble to make ends meet. Or you might be asking: how do I invest my extra money wisely? Whether you are in want or in plenty, you want to be wise as to how you spend your finances.
It all starts with priorities. Have you set your priorities? Have you discussed and reviewed your priorities recently. We live in a consumer-driven society and everyone wants a piece of our budget. Our economy is based on growth which is driven by sales. And we can easily be encouraged to spend more than we had planned for a service or product. Recently I had to review our family’s priorities with my husband as we can be so easily enticed by all the things we “need” that we can lose sight of what our priorities are.
What are your priorities? When last have you sat down and written out your priorities? They can include:
- providing for your family in the event of death or illness (i.e. having life and disability insurance; severe illness cover and income protection to provide for your family)
- providing for the future (short- and long-term savings);
- good education (private or government school)
- future education (saving for tertiary education)
- being able to retire (retirement savings)
- regular holidays (saving for holidays monthly)
- beautiful home (allocating a portion of the budget to decorating your home)
- being hospitable and entertaining friends
- dining out regularly
The list is endless and you can compile it depending on your goals.
Once you have set your priorities the next question is: is your budget allocated according to your priorities? If you are unsure, you can look at your expenses for the past year to see where you have spent your hard earned income – where you have spent your money, will reflect your priorities. Have you saved as much as you had planned? Were you as generous as you thought you were?
Where do your spending habits not align with your goals and priorities? Everyone wants a piece of your spending pie, make sure the piece they get is in alignment with your priorities.