Author Archives: Muslim Money Guide

Budgets: Ten Things You Need to Know

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    1. Budgets are important
      If you don’t know where you were, where you are at, and where you are going you’re lost. Don’t be lost financially. Budgets are important because they are a GPS tracking system for our money.
    2. Budgets tell us how to allocate our stuff
      Confused about where your money is going? Want to save? A budget will tell you how much you are spending and what you are spending it on.
    3. Budgets make sure everyone is on the same page
      If you are rooming with friends, married, or in a business you need a budget. If everyone doesn’t know where the group stands then you can easily come up short.
    4. A budget is a collection of predictions
      Just because you think you have money, doesn’t mean that you will. You can use a budget to help predict the times that you’ll need more or to know when you can save or spend more.
    5. Budgets let you decide what is essential
      Everything in your budget can be divided into three parts: essential, desirable, and expendable. If you are an unexpected medical expense, and you know that you set aside $100 a month on entertainment and flag it as expendable, then you can use that cash to help pay down what is essential, like your medical bill.
    6. Snowcones are better than snowballs
      When using your budget, if you are in debt then you need to pay that down as efficiently as possible. We advocate the Debt Snowcone, attacking the largest and most harmful debts first, then working your way down to debts with lower interest rates.
    7. Use a paper and pen to get start, use an app to stay on track
      The biggest hang up to starting to budget for yourself is the hurdle of recording all your expenses and earnings. Start with a paper and pen, write down everything you remember, then review. Once you’ve gotten the hang of it, move on to an app. For most of us, just using an excel spreadsheet may be enough. We recommend you use something like YouNeedABudget or the Mint app to stay ahead of your spending.
    8. Stop leaking money
      One thing that can kill your financial success is unneeded and unaccounted spending. If you use a credit card, you are placing yourself in the hole before you even have money to spend. If you are withdrawing cash from the ATM, remember that it needs to be reflected in your budget as well. Otherwise, you’re leaking money and may eventually go under.
    9. The Pareto Rule rules
      The Pareto Rule states that about 80% of lives is causes by the other 20%. If you have steady income, try to budget only 80% of that money to your expenses. The other 20% you should try to save and/or invest. If you want to get to financial freedom, you’ll need to save, invest, and budget for both. Using an 80/20 rule or even a 90/10 rule will help you do that.
    10. Know why you budget
      Before you start you need to answer one question: “Why?” You may want to pay off debt, invest in education or retirement, or simply get a grip on your spending. Don’t budget just because you were told it’s a good idea. Go in with an intention. “Actions are by intention, and every person will have what they intended…”

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