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Budget planning is basically the steps you take before creating a budget. These are the things you put in check to make sure you are on the right track and that you won’t forget the things that matter in your budget. Budgeting comprises of a lot of things which you will be seeing all of them shortly.
Before the budget planning
Budget planning is what you do before budgeting or creating a budget as we have clearly established from the beginning. However, there are some things you can do before your budget planning to make it much easier for you. These things are like the pre-budget planning stage. This list is only necessary because you are new to budgeting.
Separate needs from wanted
It is very easy to know the difference between needs and wants even if there can be a thin line between them. However, for some reason, it is difficult to separate these two things. One reason could be that some wants appear to be needed and another reason could be that your bad spending habits are not allowing you to prioritise needs.
However, the case may be you still need to separate your needs from your wants. Wants are important don’t get me wrong but you don’t want to gamble with your bills over a visit to the spa. Remember, these budget planning ideas are for you and me still trying to find our financial stability. Hence, whether we love it or not we must put our needs above our wants.
The simple way to get this done is by knowing your priorities even before your paycheck comes. This priorities list might not even include bills. Why? That’s because bills are more of a necessity so no one needs to tell you how important it is to settle your rent or energy bills first. Then when all the bills are out of the way then a priority list can be made for what you will do to avoid money mismanagement.
Some needs that you must consider after settling your basic/necessary bills are:
Emergency funds
settling debt
Medical fund/ Insurance
Credit card scores
Investments
Savings
Financial resources/records
Financial resources and records can be outsourced or your own records. In this case, you need both to plan your budget and you will see why they are necessary.
Financial resources
Since you know your need, find the resources to help you stay on track and achieve your goals which we will further discuss. You need to find resources that will help you or guide you and here are a few instances to help you out.
To get a good credit score you might have to consider finding resources that will teach you best practices on how to go about it.
If you plan on saving money be it for emergency funds or just saving as it might be. You need resources to help you save fast. These resources might just be apps. Or joining communities that will help you achieve your goals.
When it comes to having insurance. It is important to know how to go about it, plus best practices.
You know the financial steps you are about to take since you are considering budgeting hence take your time to know how to plan it. Hence, it is important to do some research and know extat=ctly what you plan on doing.
Your Financial records
Budgeting requires knowing your income and expenditures all in the estimate. So you need records of your income and spending to make a budget. This is important in budget planning.
If your income is never fixed for reasons such as you work extra jobs, have a side hustle, or are a freelancer. Then knowing exactly your earnings might be tough. But what you can do is have an estimate of what you will earn, give or take in the entire month and work with it. This same method can be applied to your expenditure. However, you should be able to know exactly what your basic needs such as rent and utility bills will cost.
Realistic goals
The number one determining factor in whether a goal or plan is achievable is how realistic it is. And the factors to consider to make a goal realistic are the time frame, specifics, relevance, and measurability.
What I see frustrates goals the most, which ends up stressing us up and making us feel like failure is the time frame. You become super motivated that you become blinded by reality. You saw someone writing about how they became millionaires in two years and you feel you can do so forgetting they didn’t mention the 5 years they spend trying and failing until they finally figured it out. This can be applied to every type of goal we set.
Hence, before you tell yourself you want to be debt-free, be sure that the time frame you are about to set for your goal is attainable.
The Budget planning process itself
This stage of budget planning becomes super easy if you took the previous steps seriously. Here is more of an action taking the stage where you begin to see your plan coming together.
Identify income
If you’ve done the pre-budget planning process listed above then I have no doubt this should be something to stress about because you know how much you earn already.
However, if you haven’t please do. For a budget to be successful income is important. You can’t start spending money you assume you have that is dangerous and sounds like you might be on your way to debt.
Knowing how much you earn helps you know how much you can spend. You need to know if you can afford that $100 anything or not. So pull out your check records and know your income estimate.
Determine your expenses
These budget planning tips in this content are for beginners so I’ll break down what it means to determine your expenses.
Since you are new to budgeting you probably haven’t sat down before to write down exactly the things you spend your money on. You pay your bills and take care of other important stuff but have you sat down to write them out and know exactly what each of these costs?
If you do this, your eyes would be opened to a lot of things concerning your finances. You would see is either you’ve been having a balanced budget or an unbalanced budget. But we are not here to talk about a budget so you might want to read about budgeting in detail here.
Simply right a full list of the things you consume monthly not living out anything you spend money on. Besides every item write the cost. Some bills are settled once a month but for the things, you spend weekly like groceries sum your weekly expenditure on it and get your monthly total. It’s at this point you would need to find your shopping receipt. These are records talked about earlier.
Set goals
There is nothing too complicated about this budget plan. You simply need to set out your precise financial plan. Either for the month, three months, six months or the entire year. Setting goals gives you a direction because you now know why you want to budget in the first place.
You set a goal to save an amount of money within a period of time. When you start your budget you have a clear goal that this budget is going to help you save money. This means you must include saving in the priorities of your budget.
If your goal is to make a big purchase, then your budget can help you put money towards that. Setting goals, in general, helps us to be focused. hence, a budgeting plan without emphasis on goal setting is not complete.
Create a plan
A plan is basically priorities. You clearly state what goal comes first or what needs to take care of first before the rest. Your plan is you tell yourself I have to have my savings, or emergenci=y funds before making that big purchase. The plan could be to settle that debt first before you take on any other financial step.
Your plan is simply the actions you will take, when and how. Just like goals, always make your plan realistic with the time frame and achievability.
Extra Budget planning to consider
These extra budgeting plans need to be considered if you really want to be in control of your finances all the time.
Seasonal expenses
Not every important expenditure come every month. However, it is important to be conscious of them and include them in your plans. I called them seasonal expenditures.
Examples of these expenses are anniversaries, holidays and even vacations. let your expenditure during anniversaries or holiday seasons take you by surprise. Always plan for them. Know how much you can spend during that time, the gifts you can afford and the type of party you can afford. Don’t start the new year bankrupt because of Christmas. Or buy an anniversary gift that will make you struggle the rest of the month.
Know these things and put them in your budget plan.
In Conclusion Plan to track your budget planning progress
In everything you plan to succeed at there is always a need for a progress report and in this case, you have to track your progress. Be it weekly, monthly or quarterly you need to be sure you are on track.
This is important to help you see results and also change your strategies to something workable. Anything budget means finances and since you are dedicated to this it means you want a financial change. Hence, tracking your progress is your best bet at making this process fast.
However, this process may work for you to make tracking your budget planning progress as important as the budget plan itself.
