What is a Budget & How to Create a Budget That Works for You?

Winning with money starts with effective money management and a Budget is a simple and handy tool for that.

What is a Budget?

A budget is a written plan for spending your money wisely and making it last longer.

It helps you do more with your money by Optimizing; On what you spend, why, when and where you spend and most important of all, help you save for your future.

Without a budget, you run the risk of running out of money before your next pay check and not being able to save.

A budget can help take care of your immediate expenses and also plan for long-term goals, like saving for retirement or investing. This way, you're not just thinking about today's needs, but also preparing for your future.

3 Simple steps to Financial Success 

  1. Spending less than you make

  2. Wisely investing your savings

  3. and staying out of debt

While these steps seem very simple, they are not easy.

Many find it difficult to put these steps in practice. It takes a lot of planning and discipline to follow these steps and achieve financial success.

A Personal Budget is a planning tool which can help you with the Step No 1and 3 - Saving by spending less than you make and staying out of debt.

It also helps you build the appropriate mindset to stay disciplined and committed towards achieving your financial goals.

Why is it important to budget?

You need a Budget because it...

  • Puts you incharge of your money
  • Helps you avoid over spending and build healthy spending habits
  • Makes saving and investing easier and possible 
  • Enables you make quicker and better financial decisions 
  • Encourages you to have honest money conversations with you partner, family and friends.
  • Empowers you to do more with your money
  • Helps you avoid unnecessary and unplanned borrowing 
  • Can help you come out of debt and rebuild your credit 
  • Provides financial security and peace of mind 
  • Makes travel, shopping and other fun expenses possible and guilt free

What are the different types of Budget?

Every one is different and there cannot be one strategy fits all approach. That is why you can learn the different type of budgets choose the one suits you.

  1. Traditional Budget - A simple way to budget your income and expenses and saving what is left at the end of the month.
  2. 50/30/20 Budget - Allocating 50% of your money toward needs, 30% toward wants, and 20% toward savings
  3. Tax Free Expat's Budget - Encourage high savings 25% to 50% of your income 
  4. Zero-Based Budget - Giving every dirham you earn a job, until you have spent, saved or invested all of your income. 
  5. Envelope System Budget - Ideal for people who like the physical cash to help them see just how much they have to spend. With this system, you’ll break down your financial goals/expenses into envelopes, like Rent, school fees, Loan Payments, Utilities, vacation savings. etc...
  6. Pay Yourself First Budget - It is the opposite of the traditional budget. Your first expense is saving for your long and short term financial goals and investment and the rest is spent on needs, wants and luxuries. 

How to create a budget?

Here are Eight Simple Steps for an Efficient Budget

  • Step 1: Calculate your net in hand income
  • Step 2: Track your spending the last 3 months(longer the better) to determine your average monthly expenses. Don't forget to include annual expenses like vacation, visa expenses, car insurance/renewal etc...
  • Step 3: Subract income from expenses to determine if you have a surplus budget or a defecit 
  • Step 4: Choose a goal or an outcome you desire through budgeting. Like I want to save 20% of my income, or I want to be debt free in 6 months. I want to buy a car or home in 18 months
  • Step 5: Choose the preferred budget type from above and a budgeting tool(Paper, Excel or an App) 
  • Step 6:  Set your budgets for each category of payments, expenses, savings and investments
  • Step 7: Track and adjust your spending daily/weekly to stay within budget
  • Step 8: Review and refine your budget regularly once a quarter.

Tips for Better Budgeting 

  1. Involve your spouse / partner or any other stake holder
  2. Keep things simple, do not complicate 
  3. Record and Track your expenses - Use an app or online tool to make life easy 
  4. Trim the fat - Reduce, Reuse and Refuse - Learn to say no to yourself and to your family and friends
  5. Avoid budgeting on debt or credit cards
  6. Automate savings, investments and bills - avoid late payments
  7. Be patient, it will take at least 3 - 6 months before you start seeing results

Your Path to Financial Empowerment

In today’s world of where financial uncertainties, having a budget is not just a choice, but a necessity for achieving financial well-being.

By taking control of your money through budgeting, you're not just avoiding financial pitfalls, but also paving the way for a future filled with possibilities.

Remember, budgeting is more than just numbers on a spreadsheet; it's about ensuring peace of mind and making dreams come true. 

Ready to Take charge of your money?

Download the Multicurrency Forward Cashflow Planner. It is simple but very efficient forward cash flow planner, helping you plan up to 12 months in advance and in multiple currencies.

The planner is ideal for expats earning and spending in one currency but thinking in terms of and accumulating wealth in another currency. 

Read the following posts, if you want to know more. 

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