Sunday, 29 July 2007

The Foundation - Budgeting

There is a Chinese proverb that says "A journey of a thousand miles begins with one step". In your journey for financial security the most important foundation is a budget, thats the first step. You might downplay the significance of a budget in your quest to build wealth but its of ultra importance. Remember that "if you fail to plan, you plan to fail". How apt is that saying when applied to personal budgeting.

There is nothing philosophical about making a budget, a budget is a clear indication of your finances. It will show money coming in and will show money going out. It will also show money left if there is any after paying all your household bills. While researching for this article I came across some writers who thought that traditional methods of budgeting are outdated. Whatever your preference here is the bottom line: You need to budget. What budgets also do is put into perspective all your expenses such that when you are reviewing it you can see what importance you attach to some of your expenses.

Why budget?
• It reduces stress by planning and monitoring expenses
• Its reigns in your spending and borrowing
• It makes you take a step back and review your expenses
• It gets you on track to start saving

How to budget:

You will find a lot of budget planners on the internet here is a selection of some budget tools on the net:
British Bankers Association
Here is also one from the Financial Services Authority

Budgeting is not difficult, although it may take some concentration, and a bit of work. And you do not need to be a financial or maths genius to do it! The following tips will help:
• Be honest - Don't try to skip certain items, or underestimate your spending
• Be consistent and accurate - Making a budget involves keeping a regular check on what you are spending. Try to be consistent and accurate, and keep records of what you spend.
• Work out your income. Make sure you are taking your net income i.e income after tax. The pro-forma example shows you the sort of headings your income could come from
• List your regular commitments. This includes things like Council Tax, mortgage, rent, heating, insurance, etc.
• Add up what you are spending on normal day to day living expenses - this includes things like shopping for food, clothes, transport, entertainment, and so on.
• Record what you spend on occasional items - such as birthday and Christmas presents, repairs or decorations to your house or flat, holidays, etc. These items are spent on irregular occasions but it is helpful to put in an average monthly amount.
• Make sure that the income and the spending is for the same period. For example if the income is a monthly figure, the spending should be a monthly figure as well.
• Total your income and total your spending. If the spending is more than the income, it may mean that you need help with your finances.
• It is important to review your budget monthly and

Saturday, 28 July 2007

You Can Not Ignore Personal Finances

My name is Izzy I am 37 years old I have a confession to make I am ignorant about money I know how to make it but I lack the management of it which render my efforts to accumulate it useless. It is on this premise that I would start this blog to explore ways to save money, build wealth to eventual prosper whilst sharing the ideas and tips with you the reader. Immediately after starting my first job I developed a cursory attitude towards money. I knew what my outgoings were per month but I never committed it to paper in the form of a budget. Come end of the month I wondered why I never had any money left while still owing a lot of people money. Everybody knows how difficult it is to live within your means and I can say I have been guilty over the years of spending that outstripped my earnings. I also have been making the classic mistake of assuming that as along as I am earning therefore I am making progress. I has goals then, things that I wanted to achieve that I failed to. One of the reasons why I failed is absence of personal financial planning. Lets face it your goals sometimes are inherently linked with personal finance and to ignore is to accelerate failure. Instead of stumbling from one financial calamity to the other which is no way to build wealth careful management of money is needed. Ideas on how to effectively manage money and prosper evolve everyday as new products and services are thrust to the unsuspecting consumer thats why you have to be vigilant be always on the look out for ways to save money.

I am where I am today because no one prepared me about money yet everything in this world revolves around money. If there is anything wrong with today's education is its lack of financial education. About almost everything is taught in schools today over and above your traditional subjects of Maths & Science. There is sex education, physical education but no one anywhere has ever thought to include financial education in the curricula. The journey for everyone else is the same, when you are born your parents look after you, while you go to school, after formal education you get a job and earning x amount of dollar/pounds a month without any training you are expected to make a working budget for the month. Obviously you are not entirely ignorant about money, you have impressions about money maybe impressed upon you by your parents. Maybe there was a toy, or a school trip you wanted to go to and failed because your parents could not afford it. It that point you might have thought of them as mean people but I guess as you grew older and started earning your own money you then realised that money needed effective management. Some attitudes that we inherited from our parents might not best serve us in our quest to save & grow money a change of attitude is needed.

I cant overstate how wealth building directly correlates to your management of personal finances. Even if you a high earner with a six figure income or you run a successful business, the fastest way to erode that income is mismanagement of personal finances. Start with me today!