Then, it will last for a few weeks till your financial supplies have been replenished after your huge spendings. But let me ask, can you account for the things you bought or for the services you paid for?
In reality, people have the tendency to spend exorbitantly when the money is available and they would immediately turn to saving-mode when the red-light signals start showing up.
Stay with me, let me convict you more. Sometimes, you can't believe that the goods or services you paid for would add up to your current expenditures.
Keeping a stringent budget is one of the most difficult tasks for most people. But it must be emphasized because it holds the key to regulating our spendings and living a healthy financial life.
This problem has reduced more than 85% of people in the world to a loop of periods of excessive spending within periods of scarce resources(money). But this could be overcome simply by budgeting. Though not as simple as just that, owing to the many difficulties and challenges that may show up, budgeting and stringent financial planning remains the surest way to prevent the guilt of overspending or to help you maximize your income more productively.
Let me quickly add that the major reason is not that you were never focused on controlling your spendings. It is, however, a way of helping you achieve more control. By writing those stuff down on paper, it does more magic than just storing your spending limits up in your brain.
Let us see what the standard budget should contain.
Major Components Of A Successful BudgetAccording to Reference.com, the two main components of a budget are Income and Expenditure. But are you going to stop at just that? Any basic budget must contain your income or a projection of your income and then, a list of your expenditures for the same period. Just for the sake of clarity, let me spell these out.
1. Income:This has to come first because it is the ultimate determinant of your purchasing power. It is important to keep the record of your income at the back of your mind, after all, you are trying to overcome overspending. When records are not kept, overspending is inevitable but now that you are documenting your restrictive spending plan, you don't want to overspend on paper too.
One major challenge people face is that of a relatively smaller income to even the most basic necessities of life. But that does not rule out the need for a budget because everyone actually overspend when there are no checks, irrespective of their level of income.
Your sources of income(both fixed incomes and uncertainties) and the worth should be documented. After this, you can be certain that your template is ready.
2. List Of Expenditures:Assuming you are a home planner, your expenditures will differ from those of a business person based on the framework of the source of income. In the business, your income should comprise of any returns from your business and how much you can realise from other external or internal sources.
Expenditures, in this regard, can be grouped into the following categories;
- Fixed basic expenditures: This includes your basic requirements for your daily living, like food, shelter, etc, for a domestic budget, or normal spendings for daily upkeep and maintenance of a business place. They essentially remain similar to what you get when you are not keeping a written budget plan.
- Non-basic irregular expenditures: These include items or services that you may need but you can survive without, including quarterly or once-yearly bills like your insurance(car, health), mortgage, and others. These should be accounted for too. In the absence of a budget, this component is not usually a culprit as people often have time to think about the need for them before spending on them.
- Contingencies/Emergencies: Are you have the most costs that you cannot account for. These are things that show up as emergencies. Some may be true emergencies but most of them are not actually emergencies. They are just covetousness that you would regret at the end. In a standard budget, this component must be well represented. You cannot entirely rob yourself of some non-contingent spendings. Hence, the term "miscellaneous" is often used to represent such expenditures.
3. Your investments:I have to take this out from the non-basic category because of its importance in your financial sustainability. This ensures that you are able to channel your money to things that you will be proud you did, as you simultaneously reduce wasteful spending that you regret.
4. Your SavingsThis is not conventionally included in a standard budget simply because it is assumed that whatever you do not spend is automatically in savings. This is quite true but the emphasis has to be placed on savings because that part of the income can serve as a reserve base when things do not go as planned. Investments are better indicators of more gains to you in the long and short-run and savings, on the other hand, are solely meant for immediately contingent spendings.
The aim is for you to identify the problems of keeping a basic monthly budget. These are problems that affect the successful implementation of the budget even after an attempt to make one.
Many times you would forget that you have a fixed budget to keep to. And before you remember, you may have spent above what you planned already. This problem is only noticed when you are new to budgeting or you are just overtly unserious. No offence, it is funny to me too.
In the burden of big expenditures, most of which are basic to your daily living, you would be forced to abandon your plans and focus on living first. After all, you wouldn't die in the name of keeping a budget when you have the means to live. You simply adapt to the ever-increasing costs of living.
- Overwhelming Expenditures
In the dwindling economies of nations of the world, the cost of living increases without a commensurate increase in the minimum wages or salary structures. So you actually get poorer even though your salary remains fixed. This can greatly affect how well you keep to your budget.
- Insufficient Salaries
What Is The Way Out?No matter what the available resources are, a good budget tries to work within the framework of what is available. That will mean some expenses that are considered non-essential to life will be reduced from the list of expenditures. If all the components of a budget described above are incorporated, there should be a little improvement in the financial power of the individual especially when investments are being established with the minimum reserve funds from the budget plan.
Whether or not these are merely theoretical is not yours to say for now. But on giving it a try, you will be in a better position to tell how effective budgeting can be in maximizing your funds.
The problems of forgetfulness, overwhelming expenditures, and insufficient salaries should not deter you from keeping a good monthly budget. After all, it will only make you more efficient and to have more control over your spendings amongst other plans that will add to your overall productivity.