How many times have you tried to tuck away money in a secret drawer as savings only to dip into it at the end of the month? If you answered yes to that, here’s some good news: You are less likely to feel the crunch by the end of the month if you're well organized about your finances, allow us to help with these 7 easy steps to help you get started
Be realistic
Being realistic about your finances is the most fundamental rule in creating a budget especially if you know your expenses during a specific month will be more than usual. If you are on a lower salary, do not set unrealistic targets. Chances are, you will be spending most of your earnings on regular utilities so don't set a budget that won’t work for you.
Set targets
If you plan on travelling or getting married in a year's time, you have to start prepping for it - financially. So while creating a budget, this is an additional expense you need to save a percentage of your monthly income to that specific cause. You can avoid dipping into your savings by starting early and saving up a bit every month.
Your saving percentage needs to be appropriate of your target. So if you plan on getting married in one year, and have no savings to rely on, it's not too late. From your next salary calculate an average of 30 per cent that goes to your 'wedding fund', this could be in the form of setting up a savings account or even setting it aside by transferring it back home. By the end of a year's time, you will have saved a significant amount to spend away without borrowing or hassle.
Record your details
Solidify your budget by creating an excel sheet or - if you're more of a tech nerd – find an app more suited for personal budgets.
Add your total revenue for the month and then take into consideration all expenses, be realistic about frivolous expenses. Initially, lay down your utilities, savings and basic expenses you cannot avoid and then keep a column for your expenses like eating out, shopping, spending on a friend's birthday or any expense you know you might incur.
Once you have laid down all expenses you can think off, use the remaining amount as a bonus saving by sending it back home to family members, or maintaining a small account in your home country. Do not spend money just because you have it. There could be cutbacks or emergency situations where you might need money immediately.
Track spending
Usually we splurge at the start of the month and then limit our expenses towards the end. This is where we mostly tend to fail by borrowing money from friends or creating unnecessary credit lines which then affect your next month's budget.
To avoid such a scenario, firstly pay anyone you owe before even touching your salary at the beginning of the month as you will only postpone it for the next month later.
Then track why you needed to borrow the money, was it a one off situation? Or do you tend to get into this cycle by the end of every month? Track your spending habits and record them efficiently.
Cutting corners
Once you have calculated your budget, there is no going back. Have your excel sheet written in stone and no changes should affect that. If you have kept aside Dh2,000 as an amount to spend on superficial expenses, then stick to it.
This is where you cut corners for nights out or indulging in sales at malls or any other avoidable expense. When you've exhausted that amount it's time to hold off on the parties until next month.
Checking progress
Getting a budget right the first time is not going to be easy. You will go astray with some expenses and might not be able to get every figure right. So go back and reflect on your budget on where you went wrong. It could be adding some unnecessary expenses that you could without. Or some unrealistic saving goals. Check if the budget system has made you more efficient in your spending or is it being inefficient. Initially, go easy on yourself and leave room for error and expense.
Scare yourself
If you find yourself straying from your budget more often, then it's time for a reality check. In a highly populated market with professionals replaced every day, you could find yourself without a job. Think of an unfortunate situation where you might not be able to pay your rent or might have trouble making ends meet while finding a new job.
Does your shopping spree still seem important? Be slightly pessimistic and think of what you would do in a scenario where a family member needs help. If you have no savings and are spending money monthly as it comes in, you are making yourself vulnerable to various situations. This might help you think of the future with slightly more clarity than just meeting your current monthly needs.
Remember, when you are financially independent you are in control of your individual wants and need not be dependent on anyone. You can help loved ones and even pamper yourself without being answerable to anyone. This sense of power should be enough to get you on a budget today.
For the kids and millennials reading this, listen up: The allure of our city sometimes tempts the will power of even the strongest among us – we get it. Here are a few money saving tips for youngsters in Dubai.
And for everyone else: we hope our piece on how to budget your monthly income in Dubai can help.
- Sanobar Mistry is a published journalist and is currently a teacher in the UAE
