A budget is a plan for how you plan to spend your money over a period of time. It helps you to keep track of your income, and your expenses. By setting limits on the things that you spend on and making sure that your expenses are not more than your income, you can make sure that you have money to save or spend on other things that are important to you. In this way, you can identify your essential expenses (e.g. rent, utility bills), and also your non-essential expenses. These non-essential expenses are areas where your spending can be reduced. 

Everybody's budget will be different, however, you should always make sure that your expenses do not exceed your income. When working out your budget, if you discover that your expenses are more than your income, you need to either increase your income or reduce your spending to avoid debt.

Creating a Budget

There are a number of online tools that you can use to help you create a budget. Here are some of them:


Setting Goals

Setting goals is an important part of budgeting. Use your budget to help you to achieve these goals. Your goals may be short-term goals, such as saving to buy a new shirt, or long-term goals such as retiring by 40!  Once you've set your budget goals, you need to develop the habit of tracking your expenses on an ongoing basis and make sure the spending stays within the limits you've set. 

Many budgets fail because people set goals that are not realistic. Make sure that your goals are actually achieveable. Here are some guidelines to help you to set a realistic budget:

  1. Start with small, achievable ones that keep you motivated;
  2. Pay your rent and utilities before spending money on anything else;
  3. Make a list of things that need to be paid for or bought on payday and stick to it;
  4. Before you buy stuff, shop around and compare prices;
  5. Allow for unexpected or emergency expenses;
  6. Ask someone to help you create and stick to your budget;
  7. Learn to say 'NO' - if you can't afford it, don't buy it;
  8. Give your budget some flexibility;
  9. Include some rewards to keep you motivated!


Budgeting Tips

Here are some tips to keep in mind:

  1. Watch out for cash leakage. If withdrawals from the ATM machine evaporate from your pocket without apparent explanation, it's time to keep better records. In general, if you find yourself returning to the ATM more than once a week or so, you need to examine where that cash is going.
  2. Beware of luxuries dressed up as necessities. If your income doesn't cover your costs, then some of your spending is probably for luxuries -- even if you've been considering them to be filling a real need.
  3. Save at least 10% of your income. Aim to spend no more than 90% of your income. That way, you'll have the other 10% left to save for your big-picture items.
  4. Don't count on windfalls. When projecting the amount of money you can live on, don't include dollars that you can't be sure you'll receive, such as year-end bonuses.
  5. Beware of spending creep. As your annual income climbs from raises, promotions and smart investing, don't start spending for luxuries until you're sure that you're staying ahead of inflation. It's better to use those income increases as an excuse to save more.

More Information:

You can get additional information on budgeting and goal setting from the sources below: