PLAN YOUR MONEY

BUDGETING

QUESTION?

• What should you do first when you get your money?• Answer: Plan for it! • Put in financial term: Budgeting!

DEFINITION OF BUDGETING

• A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment.• Simple example

WHY DO YOU NEED A BUDGET?

• To provide a structured plan to allocate your money among the different uses.• To evaluate on the results of your personal

finances i.e. how closely you have achieved the targets in your budget.

HOW TO MAKE A BUDGET?

• Type I: Pencil & Paper---a simple budget can be drawn up on paper with the help of a calculator. Items in the budget should include spending on all aspects of life e.g. food, necessities, transport and the amount allocated to each category.• Try it yourself!

EXAMPLE OF A BUDGET

EXAMPLE OF A BUDGET (CONT’D)

HOW TO MAKE A BUDGET

• phase 1: Assess your personal and financial situation (needs, values, life situation).

HOW TO MAKE A BUDGET

• phase 2: Set personal and financial goals.be realistic: A student working part-time is not likely to be able to afford a

new car every couple of years.be specific“I want to save 5,000 for a down payment to buy a laptop.have a timeframe“I want to pay off my laptop within the next 18 months.”state the action to be takenie through saving money, finding another employment? etc

HOW TO MAKE A BUDGET

• phase 3: Create a budget for fixed and variable expenses based on projected income.

HOW TO MAKE A BUDGET

• phase 4: Monitor current spending (saving, investing) patterns.

• budgeted amounts.

HOW TO MAKE A BUDGET

• phase 5: Compare your budget to what you have actually spent.

HOW TO MAKE A BUDGET

• phase 6: Review financial progress and revise

HOW TO MAKE A BUDGET

• Type II: Money-management websites----- Several websites, such as Mint.com and justthrive.com, have been devised to help manage personal finances. They are both free and can be accessed by anyone with internet access.

WHEN SHOULD YOU MAKE A BUDGET?

• Weekly basis, monthly basis, yearly basis. • Depends on your financial condition• Review along the way.