It's a new Year, but do You Really Need a Budget?
if corporations do then I guess...maybe
Hello and welcome to another issue of the first issue of 2025.
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Without further ado, let’s get into it.
New Year, Richer You
Countries, and organisations of all sort have plans, and in some cases visions/targets they want to achieve at a certain time. Why then shouldn’t you have one for yourself.
After all, there is a saying that goes, “if fail to plan, you plan to fail.”
It is a new year and like almost everyone, there are habits, goals or things you want to do/achieve. And one of the most popular one is making more money, getting richer or any of its variation.
What’s Rich?
Getting richer is balancing between two “forces”, the earning power and the expenses.
The formula you want, if you want to be richer, is to have your earnings outpace your expenses.
When this happens, you can accumulate the difference between your earnings and your expenses.
How you do this is at your discretion. However, there are generally two ways to go about it:
Reducing your expenses.
Increasing your earnings.
Reducing your Expenses
You can cut costs, and trim some excess fat from your expenses. The little indulgence here and there can be removed. However, the problem with this approach that there is only so much you cost you can cut. You’d have to eat, transport yourself, and find a place to rest your head. There is a floor in which going below will significantly affect your standard of living.
The issue with this taken to the extreme is that it can sap out the little joy of life. For what is the point of cutting the costs if there is no justification to do so. You don’t want to be miserly. Sweating over pennies, when you could get more dollars.
The journey is as important as the destination.
Ensure to have fun, but have a handle on it. As loosing a handle over these will lead to holes in your pocket.
Increasing your earnings
This is my preferred route as there is no limit to what you can earn. You can 2X,5X, and even 10X your current earnings. It is obvious this option might take longer.
The caution here is not to allow lifestyle inflation to creep in as you earn more.
Applying your Options
The best approach depends on the individual, but a combination of both options to a certain degree gives beautiful results. What does that mean?
You can use either approach or both. If you want to use both, for example. You cut say 5% of your discretionary expenses and then find a way to increase your earnings by 10%.
So for a person earning 100k, a 5% decrease won’t mean as much, but a combination of the decrease in expenses and a 10% increase will translate to 15% extra to save, invest or pay down debts.
Combining both approach can also mean looking at the two options in different time frames.
Cutting cost can be used as a quick short term fix. This is used to jump start your journey towards your goal. Earning more will be the long term engine driving you to your destination.
Do you need to Budget?
When you budget, you are more informed about your spending patterns - how much you spend on what. You also see one off expenses too.
It helps project your expenses, and income and simultaneously gives you direction on where to channel your money.
“If a man knows not to which port he sails, no wind is favourable.” - Seneca the Younger
It makes it easier to see where you can cut cost, and avenues you can explore while raising your income.
Remember, what you don’t track, you can’t measure. And what you don’t measure, you can’t make any better.
In the next post, we’d go through ways you can create a budget.
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See you soon.