Budgeting
Taking an active approach to plan where your money goes
​
5 minutes
You don’t need to be a financial wiz to figure out how to manage your money.
​
What are your financial goals?
Before you embark on your journey, let’s establish what your ideal destination is.
Is it to become the next resort magnate? We kid. It could be to save up for that Bali trip you’ve always wanted to go to or avoiding those payment reminders from utility companies or to be able to fix your motorbike in the middle of a date.
From small goals such as an emergency fund for unexpected health issues to longer-term goals like a down payment for a flat, this is the time to take that first step.
Use the table below to list down your goals based on length and priority – some examples have been inserted to get you started.
​
​
Where does your money go?
Now that you have identified where you want to be, let’s figure out where your money goes.
It is important to keep track of your daily expenses to understand what your spending habits are.
How do you create a budget?
For the purpose of simplicity, we will be assuming the income and expenses on a monthly basis.
​
​
Step 1 - Recording Your Income
First, record how much money that you’re receiving monthly.
These could be for example:
​
Be mindful to specify the frequency i.e. how often or when you receive this money.
In the case of variable income – where the amount is different each month – you can take an average figure; but be careful to remain prudent so don’t overestimate the numbers.
Pro Tip!
Be aware of ‘accessible money’. Pension income, for example, may take a few years (okay, decades) to access so if you want to be realistic, only note down the ones that you are able to use immediately.
Step 2 – Recording your expenses
Some expenses can be Fixed or Regular where you know the exact amount each month, for instance:
​
-
Rent
-
Cable TV and Internet
-
Monthly subscriptions eg: Spotify, Netflix, Amazon Prime (we don’t judge…)
-
Post-paid mobile packages
-
Health insurance
Other expenses will be Variable, so the amount is different for each month. These could include:
​
-
Utilities such as Electricity and Water
-
Fuel for your motorbike, car (or yacht)
-
Groceries and eating out
​
These expenses can be taken on average.
​
​
Pro Tip!
If you’re using ePortals or Mobile Applications for utilities, you can gain access to months’ worth of data from which you can calculate an average figure
There may also be Unexpected Expenses where you are not sure if they may happen or not. It would be wise to specify some potential outflow of your money for cases such as:
​
-
Medical bills
-
Gifts for forgotten birthdays (judging intensifies)
Next, let’s add up all of the above to come up with your estimated monthly expenses. You can download our template to get you started.
​
​
Step 3 – Analyse your habits
Now that you have a comprehensive view of how much money is going in and out, this is a good time to determine areas where you can save.
Do you really need to eat at restaurants on such a regular basis? Can you reduce fuel costs by walking to work (and save the environment while you’re at it)?
Ask yourself for each expense on how you can trim it down. After all, every Rufiyaa saved is an additional Rufiyaa for your future goals.
Similarly, for income, try to identify how you can increase the amount received per month. For instance, you could speak to your employers about a potential raise (we hereby indemnify ourselves from any repercussions) or think about a secondary source of finance – maybe it’s time those coffee-table business ideas finally see the light of day.
​
​
Step 4 – Setting a spending limit
If you have tremendous self-control, consider setting yourself a maximum limit for each expense category.
It is helpful to have an honest conversation with yourself on determining what is a ‘need’ in contrast to a ‘want’, such as entertainment and restaurants.
Don’t worry if you exceed that amount. The idea is to evaluate your spending patterns each month and adjust those limits accordingly.
What's next?
We understand that all of this sounds daunting and developing a financial management mindset doesn’t happen overnight.
But remember, taking this first step could be the answer to controlling your finances and edging closer towards your goals.
To get a head start, use our Personal Monthly Budget template
