“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” Ayn Rand

Budgeting is basically planning your cash and telling your cash where it needs to go. Like anything else in life failing to plan is planning to fail. Proper budgets ensure that you are creating options for yourself and that you achieve that which you have set out to achieve. A good budget has three key main components the i) Income ii) Expenses and iii) Time.

Budgets can either be i) balanced ( income and expenses match) ii) surplus ( income is more than expenses iii) deficit (expenses are more than the income).

To achieve anything, it is always good to break it down into small achievable milestones.

Below are the key steps in budgeting.

1. Goal settings: Clarity of vision and mind is the first step. Unless you know where you are going any road can lead you there.  One needs to ensure that they set SMARTER goals. The goals need to be achievable in small bits and also it should be possible to prioritize the goals. The Goals can be both mutually exclusive for example paying the kids’ school fees and starting to save for retirement can be achieved independently but given they are dependent on the same income they can be dependent and should be achieved sequentially;
2. Understanding your current position: understanding one’s true financial position is key. This usually involves looking at the assets and liabilities and creating a path to reducing the liabilities while sweating the assets that one has. Many times we do not look at our talents and hobbies as assets but we should and try as much as possible to monetize that which we can;
3. Commanding your cashflows: one needs to list all the cash inflows from the various sources in addition to the main source of income in form of salary or business income. Budgeting expected windfall should be avoided as there is no certainty of receiving the cash. Looking at the expenses and classifying them to discretionary and non-discretionary with the aim of cutting down on the nonessential expenses should be a key component of understanding one cashflow;
4. Drawing the budget: Coming up with a budget is not easy because it is at times difficult to know what are essential expenses for example are since something we are used to up to a point that they look essential eg eating out. It is therefore means that one needs to be very clear and might need to speak to someone to help reduce their overall expenditure and/or even increase their income;
5. Implementing the budget: following the budget might be one of the other big issues due to old habits which die-hard or commitments that are not easy to get out of like debt repayment. It is therefore important that one gets disciplined and even create an accountability partner to work with.
   

Some the reasons why we end up off-budget include:

1. Failing to plan
2. Taking easily available debt
3. Not sticking to the budget
4. Not having an emergency net
5. Not Investing’s  and buying depreciating assets and confusing it as an investment
   

Below are some of the key tips that one can take to help in their budget refinement

1. Write down and itemize every part of your income and expenses;
2. Look for alternative sources of income this might mean taking a second job or starting a business
3. Before spending your cash set aside 10% of it for investment purposes and if in debt place at least 20% for debt repayment
4. Reduce on the non-essential expenditure, for example, eating out can be reduced to once a month. You can even reduce loan payments by loan consolidation and even looking for bargain purchases
5. Save up for unforeseen expenditures and also for any capital expenditure
6. Follow your budget to the latter
   

No matter how big the temptations are not to remain within budget always ensure that you are able to rework your life back to a budget that is not strenuous and let it change with the changing circumstances.  Ensure you take control of your finances by planning them well.