Unknowingly, many people sabotage their own financial success because their mindset about money gets in the way. Despite seeing and hearing about the many successful people around the globe, they tend to believe that financial success is not possible for them, and subconsciously they indulge in things that make it impossible for them to succeed. They think achieving financial success is a difficult feat, and it’s reserved for only certain people.
Having a positive mental attitude about money, however, can make all the difference, because the mind is very powerful. Making the decision to become financially free, believing it’s possible, remaining positive despite the obstacles, and putting a plan in place to execute, is half the battle to achieving financial success and enjoying the freedom that comes with it. A significant part of your plan should include creating a budget!
What is a budget?
Oxford languages describe a budget as an estimate of income and expenditure for a set period of time.
Examples of a budget can be seen on the internet, and although they may be different, most will include the following categories:
- Personal Effects
- Debt Servicing
The first 9 categories are self-explanatory. The miscellaneous category is where you would put other expenses such as charity contributions that don’t fall in the other categories. However, it may be better if you list all the expenses separately for more clarity.
To create your budget you need the following information:
- Your net monthly income: The income you take home after taxes and other deductions
- All your monthly expenses: Be as accurate as possible — round up expenses instead of rounding down
- The amount you spend monthly in the other categories that are not considered monthly expenses: Be honest about these amounts even if it’s difficult to accept
Once you have all the information you can fill in the amounts in the different categories so you can see where your money is going, and where you could perhaps manage your spending better to reflect a more ideal budget that fits within your financial freedom plans. For instance, suppose you want to be saving more money each month, you could perhaps reduce the amount you spend on clothing and entertainment so that more money is available to save. When you are satisfied with your budget, make multiple copies, and put in places where you will see them regularly.
Creating a budget and not adhering to it will not produce the result that you expected. Plus there will be times when unexpected expenses come up and you have to make some adjustments. For this reason and more, it is important that you review your budget frequently and make necessary adjustments whenever necessary.