June is typically a national budget month, and it wouldn’t harm us if we took a closer look at how our household budget is performing. If you recognise the importance of budgeting, it is equally beneficial to update it periodically.

While a budget is the most basic tool of personal financial management, it draws the least attention in our day-to-day activities. In an ever-changing environment, creating and sticking to your household budget takes some bit of hard work, but it’s far more rewarding than having none. Not using a household budget is akin to aiming blindly, with no roadmap to give you direction.

The timing is right for an update because the national budget will have an impact on the one for your household, so it’s advisable to align the two once the official national budget statement is delivered by the Minister of Finance, Planning and Economic Development.

In looking at the performance of your household budget, it’s advisable to examine why you created one in the first place. A budget is not supposed to be viewed as a restriction to living a ‘good life.’ It should be a tool to effect your personal financial goals. It should help you track your income and expenses, as well as help you prioritise. It’s always advantageous to have an idea what you will do with your money over the short and long-term before you earn or even spend it. That said, for those who frown upon the budget, now is the time to draft one.

You can choose the traditional record of outlining your budget in a notebook or use an Excel spreadsheet. There are also several applications online that can facilitate the budgeting process, and this can be done by a simple search online.

If you are just starting out, it can be tricky to estimate the allocations for each category, after you have listed all items in your budget.

For those doing the review, now is the time to track your actual spending against what you provisioned for. This may require adjusting in the areas you have overspent and compensate for this, to keep on track. In circumstances where there is no room to move, you must figure out how to increase the income to be able to cover the budget items.

There are several budgeting strategies at our disposal, but the most common one is the 50/30/20 rule. In adopting this, make sure its applicable to your individual or household situation. With this strategy, 50% of your income is allocated towards meeting essential needs; the 30% goes to personal expenses while the 20% should go to items that build assets like saving and investing. It can also include a provision for debt repayment and the emergency fund.

When it comes to essentials, these are things you cannot do without like food, shelter, clothing, medical expenses, utilities and tuition, among others. Personal expenses are in the wants category, where items like dining out or entertainment fall. You will not die if you cut these items out in months where money is less.

Once all your items have been in-put in your budget, that clearly shows income, expenses, their allocations and timelines, you can determine how you will track and at the same time stay on course. On the other hand, those who already have budgets can, during this review, determine if they are on course or not and what has caused the deviations. During the review, consider the new national budget and the implications it has on your household budget.

For example, will it require you to tighten your belts further, by slashing some non-essential expenses? If you lack any room to manoeuvre, how do you plan to increase your income to meet the deficit? Another sticky item to your budget is the level of consumer debt. If you are financing your budget with consumer debt, then you have a problem on your hands.

A good appetite for borrowing for consumption is one of the biggest factors that derail our household budgets. This means that you must urgently shift your focus to generating income that will sufficiently service your consumer debt. Consequently, this may leave little room to save and invest, and effectively derailing your financial goals.

Most importantly, cultivating financial discipline is the most effective means to stick to your household budget. This ensures that you live within your means and that you are in a position to prioritise your spending and make adjustments to minimise wasteful expenditure.

As such, discipline drives implementation of your financial goals through the budget tool. Short of this, your budget items will remain neatly lined up on paper or on your excel sheet.

The writer works with Bank of Uganda