Making a personal budget
To get ahead financially, creating a budget is essential to control your spending and visualise where you are in relation to your financial goals.
1. Set your financial goals
- Setting your short-term, mid-term and long-term financial goals is an important step towards becoming financially secure. If you are not working toward anything specific, you are likely to spend more than you should.
- After setting your goals, you will be able to visualise your goals and track your progress to reaching your goal. Make sure to set S.M.A.R.T goals, goals that are specific, measurable, attainable, relevant and time based.
2. Determine your income and expenses
- With everything becoming digital, you will be able to access your income and expenses at the tip of your hands. Hence, it would not be too difficult to determine your income and expenses. Record all your income, how much money is coming in, when it is coming in and where the money is from. After that, add up all your expenses and separate them into fixed expenditure, unnecessary expenditure and unexpected expenses such as medical bills. Separating them into different categories will help you determine where you can cut down on and how much of those expenses are fixed and necessary.
3. Check for unnecessary expenses (prioritise spending needs vs wants)
- Now is the time to eliminate unnecessary spending. Once you have reviewed your spending, you will probably find unnecessary expenditure. Identifying all your unnecessary spending and adding it up will show how much money you could put towards saving. Of course, you do not want to feel like you are depriving yourself and a treat each week is fine. So, set aside a small portion of your money to enjoy yourself while still living within your means.
4. Set spending limit
- After knowing exactly how much your income compares to your expenses, you will be able to determine what are unnecessary expenses and where you can cut back. Knowing how much income is coming in and how much fixed expenditure you are incurring will help you set a spending limit. After setting your spending limit, make sure to stick to it. There are many free online budgeting tools available, such as the MoneySmart Budget Planner found here.
- There is also a multitude of smartphone apps that can help you record everything you spend. This can be an interesting exercise. At the end of every month, you can easily compare your total purchases and outlays to your budget. You might be amazed to see where your cash is actually going.
5. Review budget
- Make sure to review your budget regularly and record any change in your income and expenditure. Also, make sure to see where you are in relation to the financial goals you have set for the short to long-term and adjust your budget to achieve them.
At Hejaz Financial Services, we have investment accounts to help you grow your savings Islamically. Visit https://www.hejazfs.com.au/investments/ to learn more about our Islamic investment options or give us a call at 1300 043 529 to talk to our licensed financial adviser about what best suits your situation. Our financial advisers can help you understand your risk comfort level, and design an investment strategy that’s right for you.