PERSONAL FINANCE: Make budgeting work for you

If you were to ask people what they feel when they hear the word ‘budget’, you will find that they do not consider it a pleasurable experience. They use words like ‘restricted’, ‘sacrifice’, ‘failure’, and ‘hard work’ to define it. We all know we should keep one, but we detest them and therefore we don’t make them. But maybe there’s a way to fix that.

Akoth keeps a budget. She is married with two children. She has a job, a car and a social life. She goes on holiday with her family once a year. She also has dreams and aspirations. How has budgeting helped her achieve some of her dreams?

Budgeting helps her turn dreams into reality.

Some of Akoth’s goals are to be able to retire well and have her children attend a particular quality of university. She would also like to buy a house. All these will require money. Her initial budget helped her make a decision on what to put into her savings and investments every month. She also decided that her dreams were more important than feeling like she was making too many sacrifices. She decided to feel that her budget would ensure that she will get to do what she wants. As her income increases she adjusts this budget to ensure that her “dream account” also benefits from the increment.

It brings awareness into her everyday financial life.

Before the budget, Akoth would spend money on impulse. Now she knows exactly how much money she has to spend on every part of her life. Surprises are rare and even when they happen, she quickly adjusst. She has realised that she will not die because she is not able to buy everything she feels she wants.

  It helps her spend money without feeling bad about it.

Time was when Akoth would feel guilty for spending because she was never sure which bills she had pending. Now she allocates a certain amount of money to an item called ‘miscellaneous’ to cater for emergency spend. It was ‘miscellaneous’ that took care of a gift she bought for a friend’s baby shower, and that will pay for emergency repairs if something in the house breaks down, or an entertainment event she hears about that she feels she must attend. Her budget also helps her determine where she cut her spending in order to cater for some of these emergencies.

  It enables her to find long-term ways of saving money.

Evaluate your budget on a monthly basis and you will start seeing opportunities to be clever with money. After three months of looking at the money she spent at the salon, Akoth saw that it would be cheaper to purchase the hair products and then just go to the salon for styling.

  It stopped the fighting in her home.

Akoth and her husband used to fight over money, but now they are on the same financial page. Before they came up with a joint budget, he felt like he was carrying the burden of many of the family’s expenses. Now he feels like they are evenly shared. They also save money towards their common goals. Doing so together opened the channels of communication between them.

  It ensures she goes on holiday.

Akoth now treats her holiday the same way you would treat rent. Money goes into a specific account to pay for this every month, and this allows her to go on a guilt-free holiday.

Your budget is not cast in stone and it will evolve. If something about it doesn’t work for you, change it. However, do remember that a budget is not a negative thing; it is actually a very empowering tool to help you build the life you want.

Waceke runs a programme on personal financial management and wealth creation. To sign up, email her at [email protected]| Facebook/centonomy or go to www.centonomy.com