Global Money Week – Budgeting

18 March 2024

Budgeting is like creating a plan for your money. It involves figuring out how much money you have coming in (your income) and deciding how you want to allocate that money to different expenses and goals. It is essential for managing your finances effectively, achieving your goals, and securing financial well-being now and for your future. Budgeting ensures we are living within our means. There are many reasons why we need to budget:

• Keep control of your spending.  
• Achieve your financial goals.
• Prepare for unexpected expenses.
• Reduce stress by knowing where your money is going and having a plan for it.
• Avoid debt by living within your means and understanding your finances.

Remember, budgeting is about making your money work for you and helping you achieve your financial goals, whether that's saving for a big purchase, paying off debt, or building wealth for the future.

Budgeting Case Study – Meet Sarah!
Sarah is a 22-year-old recent college graduate who just started her first full-time job. She wants to create a budget to manage her finances responsibly. Here's a breakdown of her budget:

1. IncomeExpenses (monthy)
   Sarah’s monthly income after tax is €2,146.
2. Expenses (monthy)
   Emergency Fund Housekeeping €200
   Groceries €150
   Transportation (petrol/public transport) €100
   Car Loan €100
   Phone bill €80
   Entertainment (eating out/nights out) €200
   Miscellaneous (clothing, make-up) €200
   Expenses = €1,030​

3. Savings Goals
Emergency Fund €200
Fun Money (Concert Tickets/Holidays) €200
New Car €100
Total Savings Goals = €500
Remaining Funds = €616

Sarah can decide what to do with the remaining €616. She might allocate it towards additional savings, paying off debt (if she has any), or investing for the future.
This simple budget helps Sarah manage her money effectively, ensuring that she covers her essential expenses, saves for the future, and has some discretionary funds for fun activities. She can adjust her budget as needed based on changes in her income or expenses.

Questions you need to consider before starting a budget:

What is my income? Calculate your total monthly income from all sources.

What are my financial goals? Determine what you want to achieve financially, whether it’s saving for a house, paying off debt or building an emergency fund.

What are my essential expenses? Identify what must be paid (housekeeping, groceries, transportation etc.)

Do I have any existing debts? Take note of any outstanding loans and consider how you will incorporate these payments into your budget.

What is my risk tolerance? Am I in a position to handle a financial shock?
 
Budgeting can be made easier with An Post Money Manager.