Control Your Dollars

Speaker Chivon Obiri-Mainoo
Jan 7, 2017
2 min read

Many times, when I speak with individuals about budgeting, the response is that they don’t have time, they hate budgeting, or they really don’t know how to budget. The first two are just excuses and the latter can be accepted to a certain degree. However, even the act of writing your income and expenses on a napkin is still better than doing nothing at all.

It’s the beginning of 2017 and we want to start the year off right by doing the right things with our money. This means that we must start by doing the basics which is budgeting. It is imperative to know that when it comes to budgets, it is not one size fits all thus do not get into the habit of comparing your budget with someone else’s. Also, put it in your calendar that every month before the month begins, you will sit down and allocate at least 30 minutes to work on your budget. If you haven’t been doing a budget consistently, it will take you a minimum of three months until you will feel comfortable with the process. Once you become comfortable with the process, you will find that it will be automaticas you will be very familiar with the process and take less time.

Software:

Must you have an accounting software to do a budget? No! Due to the age of technology, I know that many may feel that they must need this, but you do not. If you like things to be automated,software such as Mint, Quicken, QuickBooks, and Microsoft Money are all excellent platforms. If you like spreadsheets, Excel is an excellent choice as well. If you are not comfortable with any of these options, a simple piece of paper and pen will do just fine.

How to Start:

Anytime you are starting a budget, you take your “Net Income” which is your “take home” pay. That is the gross income minus taxes. Then, it’s a good practice that you cover your “Four Walls” before you pay any bills. These are-

Shelter
Groceries
Transportation( Basic)
Clothing (Basic)

Why is covering these four things so important you might ask? Well, you need a roof over your head, with heat and lights on. Then you need food to survive. You need basic transportation to get you to and from work (we are not talking about fancy vehicles that are out of your price range) and you need clothing for your everyday needs (not designer clothes). Once you have covered these four areas then you can start allocating your dollars to various categories. It is always good that your fifth item be paying yourself. This means putting funds away into some sort of savings account. You need to make sure that every dollar is spent so if you bring in a net pay of $500, that amount needs to be spent on paper. This is called a zero based budget.

Example:

Net Pay (income) - $500

Housing (Expense) - $200

Groceries (Expense) - $100

Transportation (Expense) - $50

Clothing (Expense) - $50

Savings (Expense) - $50

Movies (Expense)- $25

Gifts (Expense) - $10

Investment (Expense) - $15

Total Expenses $500

This an example of basic allocations to different categories. Happy Budgeting!