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Budgets for personal finance

Establishing a budget is an excellent way of tracking your spending and  you do not need to be struggling with money matters in order to benefit from using a budget. 

Budgets can expose some cold hard home truths

Doing a budget can be the simple solution to rectifying a challenging financial situation but few people do a budget because it exposes spending habits which they prefer to keep hidden. Many people do not want to change their habits despite it costing them an arm and a leg.

There are two parts to a budget.

Your income and your spending.

Your income can be wages from a job, profit from a business, or  income from investments.

Your spending covers everything which is costing you money. 

In short if it makes you money it is income and if it costs you money it is spending.

If you can do some simple maths you will soon discover whether you are left with a surplus or a deficit.

If you have a surplus and you are in debt, use the money to pay off your debt.

If you do not have any debts you can use some or all of your surplus for one or more of your goals; this could be saving for a holiday, saving for a house deposit, saving for a car, or investing it in the share market.

There are so many places to invest your money these days that if you did your homework you will find an appropriate investment for your circumstances.

If you have a deficit you need to take some kind of action rather than try and bury your head in the sand because if you do nothing your financial situation will worsen.

There are two things you can do to balance the books;

1 Reduce spending

2 Increase your income

I don’t know how financially literate you are but if you do not understand financial jargon then I advise you to see a financial advisor to discuss your situation. The public library will have information on where to find a budget advisor.

At the Library will will also find good books on how to manage your finances and increase your wealth.

A budget advisor is unable to help you unless you are completely honest about where your money is going. 

It is up to you to make the decision on which sacrifices you are prepared to make. No one else can make that decision for you.

Your spending can be placed in two categories, your needs and your wants. You may be able to reduce some of the money you spend on your needs but it is the money you spend on your wants which you may find easier to eliminate. 

Being able to afford whatever it is you need can be as simple as re prioritizing your spending. It is a matter of transferring your spending from one item to another.

ABOUT THIS ARTICLE

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Financial Windfalls

Financial Windfalls

What it is

Written by R. A. Stewart

A windfall is a large amount of money you didn’t expect to receive. It could be $200, $1000, and more. It is an amount of money which was not budgeted for because it arrived unexpectedly. Unless you have mastered the art of financial discipline there is a risk that this good fortune will be frittered away with no improvement in your financial situation. It is important therefore that you have a plan for any unexpected cash that comes your way. In this article I will take a look at some of the more common forms of windfall and explain how best to take advantage of them.

Types of Windfalls

There are various types of windfalls, they could be:

An Inland Revenue refund

An inheritance of money or property

Lottery winnings

Gift from a rich relative

Life insurance payout

Employee bonus

These are just some of the kinds of unexpected windfalls one may receive during their lifetime. It is important not to pin all of your hopes of a financial miracle on a windfall if you are in some kind of financial mess. There is no substitute for diligence. Most of the windfalls are the result of living a responsible, diligent life; for example you are not going to receive a tax refund or an employee bonus if you are not working.

As for a lottery win; one must understand that for every one that gains a windfall in this way, there are many thousands who do not. It is a case of thousands contributing money into the pool but only a few taking out. This is luck! The amount of money lost by each individual lottery player is equal or in most cases greater than what one considers a large windfall.

How to take advantage of a windfalls

Gaining a windfall is one thing but taking advantage of it is another. People who come into a sum of money unexpectedly will follow the same pattern of behavior with any windfall as they do when they receive their pay packet…

Those who are spenders will spend it, those who are savers will save it, and those who are investors will invest it.

The end result will be that they will be in the same financial position as they were before  they received their windfall.

Is a Financial Windfall Discretionary Spending Money?

That all depends on your personal financial situation.

The answer is “No” if…

You have consumer debt.

You have credit card debt.

You have a student loan to pay back.

You have some other debt.

Even a mortgage.

The answer is “Yes” if…

You have absolutely no debt.

Money obtained from a financial windfall is discretionary spending money if you have no debt but that does not mean that you should just go and fritter it all away. Windfall money can be used to strengthen an already solid financial situation. One way you can do this is make voluntary deposits into your retirement fund or to put it toward your emergency fund.

About this article

This article is of the opinion of the writer and may not be applicable to your personal circumstances therefore, discretion is advised.

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