From the articles on praticals of investment and saving, I believe one has grasped something. Saving and investment requires one to plan and living within your financial means is part of that plan. Budgeting is this the core activity of financial management. This enables one to live in their financial means. One should understand that consuming more than what their income permits will give them more financial obligations.
Most people fail to live within their means because of two major reasons
- The need to belong to a certain group or comparing – Everyone has got friends and there is no problem with having many of them. The problem only comes when one fails to accept that incomes are different. Just because you are friends it does not mean you have to wear the same brand or shop at the same shopping center. Your friends budget may allow him/her to buy lunch daily but for you it means cooking lunch daily. The moment you start trying to be like your friend who buys lunch every day, you will realize your income may do nothing tangible for you. It is important to know how far your income can strength.
- Unnecessary Prestige – Some people what to be viewed differently by society therefore they try to match the class that they want society to view them at. They have a problem of wanting to impress. One may pretend that the business is generating profit whilst he/she is just breaking even. Once one is always after making an impression and not express their true self, finances will start to be misused. Once finances are being misused it also means that most monies can be used on none productive things. This results in one failing to attain their full potential when it comes to what their monies could have done for them.
Why Budgeting?
You will know what to buy and avoid impulse buying. How many times have you walked into a shop and saw a product on promotion and you had not budgeted for it but you still go ahead and brought it? Most people justify their actions by saying it is cheap so it’s ok. Once you budget you know priorities are core and luxury comes after all priorities have been met.
You will know how to spend. One should spend on things they have planned for. You can’t just spent because you have the money. Once you have it, plan how you are going to responsibly and productively spend it. You avoid scenarios were you will be asking yourself ‘but were did the money go?’
You will work with what you have. A budget gives one limits on how far they can go regards they spending. A budget acts as a bench mark. For instance a budget can tell you that you are not a US$50 Perfume person. You can afford a perfume that costs $15 or less. No need to argue with that, just embrace and yourself and your income to grow don’t suffocate it.
How to live within your financial means
- Have a budget – plan for your finances.
- Don’t carry too much hard cash – this is to avoid impulse buying
- Stick to your budget plans – financial discipline
- Plan for the unbudgeted – funeral policy, medical aid and etc.
- Constantly review your budget and alter were there will be need for that.
Be financially displined by managing your finances. #budgeting
Mitchell K Name (Economist) namemitchel@gmail.com