Ever wondered where all your money goes to when you start realising that there is more month than money? If you are wondering how you can quit cheating on your budget by setting a realistic goal that sees you flourishing in your finances, here is what you need to know.
Start from the beginning
Where did it go wrong? Asking yourself this question is the beginning of finding a way forward with your finances. One way you can do this is by printing out your bank statements, three months’ worth, and carefully going through them.
Doing this will reveal your income and expenses and where you are bleeding financially. It requires an honest introspection on some of the things you currently spending money on that you don't need.
Setting unrealistic expectations for your money
You may have a picture of what you want your financial relationship to look like, the things you will be able to afford and the places you want to go with it. However, setting an unrealistic expectation on what you currently earn can be the equivalent of shooting yourself in the foot.
It is crucial to spend money on what you can afford and the best way to do this is always to ask yourself these three important questions:
The last question is a great way to gauge if you can afford what you are spending your money on. If you cannot buy it twice, it means that you cannot afford it. Instead, work with your income by setting up a budget that it can adequately cover.
Your budget is different from the next person. Therefore, speaking to a financial advisor can help you find something that is suitable for all your needs and wants without putting a strain on your finances.
Setting a realistic budget
Having a clear picture of your income and expenses can make it easier to navigate your way to set up a realistic budget. When setting your budget, split it into your needs, wants, investments and savings.
The latter can comprise of 15-20% of your income. Make sure to include the cost of entertainment, transport and airtime that can derail any budget. A general rule of thumb is to save 50% for your needs, 30% for your wants and 20% for savings and investments.
This method may not work for everyone, which is why it is crucial to adapt your budget to match your situation.
Any relationship can be derailed by trying to keep up with the Jones's, which is why you need to focus on what works for you. Having an honest conversation with your loved ones about what you can and cannot afford can also make it less stressful to adapt to a budget that is easier to keep.