“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like.” 

– Will Rogers 

The difference between the rich and the poor is not so much about how much they earn but in how they plan and spend their income. The rich do this through a budget. What is budgeting? Budgeting is the process of creating a plan on how to spend your money or income.

In other words, a budget is simply a spending plan. One notable thing about personal budgeting is that it helps you to balance your income with your expenses and avoid debt in the short to medium term. It is much easier to slide into debt when you do not have a strong budget. Following a budget or spending plan will also keep you out of debt or help you work your way out of debt if you are currently in debt. In another sense, budgeting ensures that you will always have enough money for the things you need and the things that are important to you. 

“Budgeting is not just for people who do not have enough money. It is for everyone who wants to ensure that their money is enough.” 

– Rosette Mugidde Wamambe

What is Budget Forecasting and Planning?

Budget forecasting helps you to map out a spending plan for the future. By doing this you can easily forecast which months your finances may be tight and which ones you will have extra money. Budget forecasting is essential in a sense that it helps to extend your budget out into the future and also allows you to forecast how much money you will be able to save for important things like your vacation, a new vehicle, your first home or home renovations, an emergency savings account, marriage or your retirement. Using a realistic budget to forecast your spending for the year can really help you with your long term financial planning. It is worth noting that budget forecasting is essential in keeping ones finances in shape. 

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Becoming rich is hard. Staying broke is hard. Choose your hard.

– Eric Worre

What Are The Steps To Making A Good Budget? 

Below are some guidelines on how to draw a good budget. 

Step 1: Set a clear goal for your finances 

How do you want your finances to look like in the next one year? How much do you want to earn and spend at the end of every month? You must be able to put figures to these. That serves as a guideline for you. Remember that goals for your money will help you make smart spending choices. Goal setting is the first requirement for becoming financially free. 

Step 2: Identify all sources of income and your expenses

This is a very important part of the budget. You must be able to identify all the sources of income at your disposal. At the same time, you should also be able to identify all the places where your money goes. You must track all your expenses. It must be said that one of the reasons why many end up in debt is because they are unable to tell where their money goes. While they know how much they earn, they cannot tell exactly how they spend that money. However, keeping a keen eye on your income and expenditure is the way to go when you want to end all financial headaches in your life. 

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“If broke people are making fun of your financial plan, you are on the right track.” – Unknown

Step 3: Prioritize your needs over wants 

Your ability to differentiate between your needs and wants can make a great difference in your personal finances. At every point in time, there will be things that are more urgent than others. You should always make this distinction when planning your expenses. In budgeting, you must be able to separate your emotions from the realities on the grounds. There is no need insisting on buying something that you really do not need at the moment. It also does not make sense buying things just to impress other people or trying to look extraordinary when you cannot afford it. Money hates the emotions game!  

Step 4: Design Your personal spending plan. 

Your spending plan is supposed to reflect how much you earn and not otherwise. Do not copy others spending plan and implement it. You may do that, when it helps to make your finances better. For example, you can copy the idea of buying things in bulk instead of the ‘piece meal’ approach. It does not help that way. Make sure that you are not spending more than you make. Balance your budget to accommodate everything you need to pay for. 

Life is a dance between making it happen and letting it happen.

 – Arianna Huffington

Step 5: Put your planning into action. 

There are people who are very good with planning but will never put such plans into action. That is not a good habit when it comes to personal financial planning. When you plan to spend 20% of your monthly income on clothing, you must stick to it, no matter what. You should not get emotional and overspend in order to look good. Just do what you say you would do! You must decide ahead of time what you will use each pay cheque for. Follow the spending rule for each expense to the letter. I am assuming that by now, you have decided how much to spend on housing, food, utilities, transportation, dent repayment, etc. 

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Whether you think you can or think you can’t, you’re right. – Henry Ford

Step 6: Plan for seasonal expenditures 

After you have drawn your budget, there will be things that will pop up that you did not plan for. These are emergencies. Things like – funeral contributions, school expenses, new shoes or some annual school anniversary celebration do come up. What you need to do is to set money aside to pay for these expenses so you can afford them without going into debt. Do not let these take you by surprise. 

Step 7: Keep improving your game. 

Personal financial planning takes time to perfect it, so please give yourself time. You may not succeed perfectly in following your budget when you start, but that is expected. What you need to do is to discipline yourself and keep learning along the journey. Do not hesitate to consult a professional where necessary. 

The slightest adjustments to your daily routines can dramatically alter the outcomes in your life.

– Darren Hardy 

I hope you have enjoyed the reading and learnt a few lessons you can apply immediately to your personal finance planning. Do not hesitate to contact me should you require further assistance on this. 

Written by: Grace Quaye (PhD)

The writer is the Chief Marketing Officer (CMO), Ashfield Investment Managers and Investment Advisor. She can be reached on +233246152750, E-mail [email protected]


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