What is the state of your household budget?
Jun 08, 2011
A personal budget is a tool that some people love to hate, yet it is a key aspect of prudent household finance management.
By Sylvia Jjuko
A personal budget is a tool that some people love to hate, yet it is a key aspect of prudent household finance management.
Just like you are currently pre-occupied with the implication of the new finance minister’s national budget proposals, the month of June is a good time to put the spotlight on your household budget.
Once you put in place a budget or a financial forecast, you will have a clear idea of your expenses, set goals for your future financial objectives and be able track your goals to ensure you stay on course.
It is important to note that since each household has a unique financial situation, this process should be flexible and can be reviewed at your own discretion.
Assuming you put together a finance forecast for this year, consider setting aside some time to review the extent to which allocations towards savings, expenses, investments and debt levels are in line with reality.
One of the key aspects to look at is expenditure column on your budget. If your household successfully committed to its expenditure plan during this period, it is an indication of maturity regarding personal finance management.
However, the reality is that most households overshot their budgeted expenditure due to price increases of most commodities.
This means that most expenditure forecasts have to be revised. Further to that, if the expenditure column has categories that are considered non-essential, the household has to prioritise and remove such items.
Another feature to consider is whether your projected level of income is in line with what you actually received. A shortfall in income has a negative implication on your household’s lifestyle especially given the rising cost of living. The advantage of having an idea of what your household spends against the level of income is that you can identify the areas to plug and what non-essentials that can be cut to suit the prevailing environment.
If your expenses have overrun your current level of income, it is a sign that you have to consider sourcing multiple streams of income to hedge against the rising cost of living.
If on the other hand you created other income sources through setting up side business which thrived, you can opt to take it to another level. However, if you were unfortunate to set up a side business that has to subsidised by your primary income for it to stay afloat, now is the time to cut your losses and try something else. This consideration can be applied to any other form of investment that was undertaken.
In addition to that, the level of debt is another key area to consider during the review.
In this regard, it is likely that a good number of people have accumulated high consumer debt under the current less than desirable environment. If you fall in this category, you need to change the situation through putting in place a debt reduction plan, going forward.
While acquiring debt is a fact of life, you should focus on getting good debt that is in most cases used to acquire assets that in turn create some cash flow.
More importantly, a review of how your savings are performing and plans to step them up is they are less than desirable has to be considered.
Other aspects of the plan like retirement planning, emergence funds can also be part of the review.
This review will ultimately allow you to assess the performance of your financial forecast as you continue to master the discipline of staying on course.
A personal budget is a tool that some people love to hate, yet it is a key aspect of prudent household finance management.
Just like you are currently pre-occupied with the implication of the new finance minister’s national budget proposals, the month of June is a good time to put the spotlight on your household budget.
Once you put in place a budget or a financial forecast, you will have a clear idea of your expenses, set goals for your future financial objectives and be able track your goals to ensure you stay on course.
It is important to note that since each household has a unique financial situation, this process should be flexible and can be reviewed at your own discretion.
Assuming you put together a finance forecast for this year, consider setting aside some time to review the extent to which allocations towards savings, expenses, investments and debt levels are in line with reality.
One of the key aspects to look at is expenditure column on your budget. If your household successfully committed to its expenditure plan during this period, it is an indication of maturity regarding personal finance management.
However, the reality is that most households overshot their budgeted expenditure due to price increases of most commodities.
This means that most expenditure forecasts have to be revised. Further to that, if the expenditure column has categories that are considered non-essential, the household has to prioritise and remove such items.
Another feature to consider is whether your projected level of income is in line with what you actually received. A shortfall in income has a negative implication on your household’s lifestyle especially given the rising cost of living. The advantage of having an idea of what your household spends against the level of income is that you can identify the areas to plug and what non-essentials that can be cut to suit the prevailing environment.
If your expenses have overrun your current level of income, it is a sign that you have to consider sourcing multiple streams of income to hedge against the rising cost of living.
If on the other hand you created other income sources through setting up side business which thrived, you can opt to take it to another level. However, if you were unfortunate to set up a side business that has to subsidised by your primary income for it to stay afloat, now is the time to cut your losses and try something else. This consideration can be applied to any other form of investment that was undertaken.
In addition to that, the level of debt is another key area to consider during the review.
In this regard, it is likely that a good number of people have accumulated high consumer debt under the current less than desirable environment. If you fall in this category, you need to change the situation through putting in place a debt reduction plan, going forward.
While acquiring debt is a fact of life, you should focus on getting good debt that is in most cases used to acquire assets that in turn create some cash flow.
More importantly, a review of how your savings are performing and plans to step them up is they are less than desirable has to be considered.
Other aspects of the plan like retirement planning, emergence funds can also be part of the review.
This review will ultimately allow you to assess the performance of your financial forecast as you continue to master the discipline of staying on course.