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Budgeting basics

If money talks, then budgeting is the translator. Whether you’re trying to save for a rainy day or just wondering why your bank account feels like a bucket with a hole, budgeting is your starting point. Think of it as the roadmap to financial peace.

What is Budgeting? (And why should you care?)

At its core, budgeting is simply a plan for your money. It tells you where your cash should go instead of wondering where it went. Without a budget, you’re like a Netflix user without a Wi-Fi connection: stuck and frustrated.

Here’s the deal: People who budget are more likely to achieve their financial goals. That’s not just good sense; it’s science.

Step 1: Know your income

Before you can start budgeting, you need to know your net income. This is the money you actually take home after taxes, not the figure you daydream about on payday. If you’re self-employed or work multiple gigs, tally up your monthly earnings. Be realistic here—counting imaginary bonuses won’t help anyone.

Step 2: Track your expenses

Ever feel like your money evaporates? That’s probably because you’re not tracking your spending. Start by jotting down every penny you spend over the course of a month. Apps like Mint or YNAB (You Need a Budget) make this process as painless as possible. Or go old school with a notebook—no judgment.

When you categorize your expenses, you’ll likely find two types:

Fixed Expenses; these are the non-negotiables, like rent, utilities, and your gym membership (which you swear you’ll use next week).

Variable Expenses; these include groceries, entertainment, and that suspicious number of takeout orders.

Step 3: Set financial goals

Here’s where the fun begins. What do you want your money to do for you? Pay off debt? Build an emergency fund? Afford that dream vacation to Bali? Goals give your budget purpose and keep you motivated. Be specific: “Save FRW 2,500,000 for a project in 12 months” is much better than “Save some money.”

Step 4: Create your budget

Now comes the part where you assign every coin a job. One popular method is the 50/30/20 rule: 50% Needs: Rent, groceries, utilities. 30% Wants: Dining out, Netflix, shopping. 20% Savings/Debt Repayment: Emergency fund, retirement, and loans.

If your current expenses don’t fit this structure, don’t panic. Adjust percentages based on your circumstances. The goal is to start, not to be perfect.

Step 5: Cut back (Without crying)

If your expenses outweigh your income, it’s time for some tough love. Start small. Cancel the wants that you don’t necessarily need. Cut back for example on take out, dining out or junk food. That’s money you could save by meal planning and buying only what you’ll actually consume.

Step 6: Build an emergency fund

Life happens, having an emergency fund is like having a financial cushion to soften life’s blows. Experts recommend saving three to six months’ worth of living expenses. Start small if that feels overwhelming; even 500,000 Frw can make a difference.

Step 7: Monitor and adjust

Budgets aren’t set-it-and-forget-it. Check in monthly to see what’s working and what isn’t. Overspent on entertainment? Adjust next month’s budget to balance it out. Think of your budget as a living document that evolves with your life.

Bonus tip: automate everything

Take advantage of technology. Set up automatic transfers to your savings account or schedule bill payments to avoid late fees. Automation reduces the temptation to spend money impulsively—out of sight, out of mind.

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