A simple 4-step approach to create your budget

budget approach

A key point about financial independence is to figure out where our money goes. Certainly, without an appropriate plan or method, not all that we spend on can get detected. This is one reason budget becomes necessary in our personal financial management since a well-planned budget tells your money where to go instead of pondering where it goes. With a budget, you know how much is flowing in and how much is going out. In effect, you have a personal kind of balanced sheet- a sort of financial equilibrium. You then control what is going out such that it becomes lower than what is coming in, which is the prime goal of a budget.


However, sticking to a budget has been one of the most difficult aspects in our personal finance management. This can even be worse when such a budget is complicated to follow. Fortunately, a budget can be uncomplicated and manageable if delivered in a simpler format and language. In the coming weeks, I will be sharing a spread sheet file (downloadable) which covers budget and other personal finance management, but for the meantime, let’s focus on some simple steps to get our budgets done.

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Step 1: Track, as much as possible, your expenses for at least 3 months

Tracking your expenses helps determine how much you spend and what you spend on. I’ve been doing this for some years now (with the aid of a spread sheet) and I can testify how useful it is. To make it easier and less boring, I try to minimise the habit of going to the mall for every single item. I’m the type who prefer to spend in bulk- I buy much of my stuff at one go. That means instead of going to the mall every day to buy one or two pieces of items, I will plan and buy whatever I would need for a while- for a week or two. By doing this, I avoid spending every blessed day and thus reduce the time I spend on updating my spread sheet file.

Why tracking for at least three months? Well, some expenses do not come regularly. Such expenses include educational fees (which are normally paid on a termly or semester basis) and rents which are paid bulkily in advance. Ideally, it would even be more useful to track your expenses for about a year.

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