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Staying Within your Budget

Making a budget is a simple task and once shown how it is done, almost anyone can make a budget. But following one and sticking to it, can be much harder. It takes discipline! You must respect each part of the budget, from establishing financial goals, to controlling your spending, to honoring your commitment to save. The following tips tackle most common issues people have with staying within their budgets.


Issue 1: Irregular income per month

If not a salaried person, one of the biggest problems people face in Pakistan is that of irregular income. Income and expenditure both fluctuate from month to month, and season to season. It is possible, however, to predict this in advance, to some extent. For example, ask yourself: what time of the year do you have a little more money? When are you short of money?

Use a calendar you can see that income and expenditures vary depending on seasons, activities, religious and social events as well as life events (for e.g. births or deaths). This calendar can be used as a tool to estimate income and expenditure trends while making a budget.

Issue 2: Staying within the Budget

With rising inflation and increasing responsibilities, how can any household stay within its budget? While it is not easy to do, its importance is vital to your financial well-being.

If you mix 3 – 4 different types of daal (lentils) together, it is very difficult to separate them later! Daal should be organized beforehand, so that is it not difficult to separate later. If you put different kinds of daal in one jar, how can you separate it when you need one kind of daal to cook?

Household spending should be like daal: By categorizing household spending, and keeping them in different clusters, a household budget helps ensure that all expenditure stays separate and does not intermingle. This way, when one is unexpectedly increased you can curb spending on another expenditure.

Try the simple but effective ‘Envelope Technique’. Organize your household spending into the following five categories: Business Expenditure, Household Expenses, Debt Repayment, Short-Term Expenditure, Long-Term Expenditure.

In order to better manage your money, at the beginning of each month you can allocate an amount for each of these envelopes and then divide their money between these. It is not important for savings to be in thousands. A little amount is also a contribution towards short term or long-term savings goals.

This is a great way to keep savings separate and out of reach, so that it is not spent and keep track of your spending.

Issue 3: Expenditure Exceeds Income

The third and very common issue raised by people is: What to do when expenditure exceeds income? Despite sticking to your budget and tracking your spending, this is a common concern which comes up often. There are two solutions that are directly within your control: to earn more money or to spend less money.

The third and last option, depending upon your borrowing power and type of credit utilized is to borrow money. Before you do, however, read our recommendations for Debt Management.

When conducting field trainings for the Nationwide Financial Literacy Program, this was a question our trainers would put out to low-income rural population around the country. Some very enterprising suggestions would come up. See if any of the following can be applied by adapting it to your lifestyle or skill-set.

Ways in which a household can earn more money

Ways in household can spend less money

  1. For farming communities, a change in crop cultivation was suggested. The idea being that faster selling vegetables will increase household income
  2. Utilizing skills that the entire household has: have you considered encouraging your son/daughter to babysit or offer tuitions for the children in your neighbourhood? Perhaps your wife or you can utilize their writing skills to work part-time for an NGO?
  3. Ask for a pay rise at your current job. People are often scared to do this, yet why not simply ask - the worst that can happen is they say 'no'. Simply ask for an appointment, prepare your points - which should be more about your job role than 'I need the money' - and see what happens. It's just as difficult for an employer to say no when you ask, as it is for you to ask in the first place

 

  1. Buy household items in wholesale in one go instead of on credit
  2. Plan ahead to buy necessities when the prices are lower
  3. Get second-hand books from other students
  4. Start a kitchen gardening for own consumption
  5. Recruit everyone in the house to spend less money on household utilities
  6. Be creative when planning outings: picnics at the beach or one of the many parks in the country which are getting cleaner, with home-cooked food or sandwiches are a great and inexpensive way to spend time with the family
  7. Carry less money or save money in a safe place (thereby avoid temptation to spend)