1) Know yourself
Before you start planning your budget, take some time to observe and record your current income, expenses, and spending habits.
Take note of your:
- Assets – the things you own that are of value e.g. your car, motorcycle, computer, etc.
- Liabilities – what you owe others e.g. vehicle loan, personal loan, unpaid bills, etc.
2) Set your priorities (needs & wants)
Differentiate between the things you need and the things you want. Your needs are always more important than your wants. Identify your top 3 goals, e.g. retirement planning, a down payment for a home, emergency savings.
3) Plan out your budget
Look at your current expenses and identify what items you can save on and what items you don’t actually need. At the same time, look at things you should spend money on, like paying off your credit card debt or buying medical insurance.