Salam (may peace and blessings be upon you) and welcome to Muslim money, where we guide Canadian Muslims on growing their wealth and planning for the future. In a society where discussing finances is often considered taboo, we’re here to break the silence and empower you with knowledge. Today, let’s dive into the fundamental aspect of financial planning: budgeting.
Understanding Budgets: As you embark on your journey towards financial stability, the first step is to establish a budget. A budget is essentially an estimate of your earnings and expenditures over a specified period, whether it’s one, three months, or an entire year. In Canada, it’s noteworthy that 49% of Canadians who maintain a budget are more effective in managing their monthly cash flow, avoiding overspending and the need to borrow for day-to-day expenses.
Income and Expenses: Your budget revolves around two key elements: income and expenses. Income comprises money flowing into your bank account from various sources such as employment, side hustles, investments, family, or government programs. On the flip side, expenses include the funds you utilize for daily living, encompassing rent, food, entertainment, and more. The goal is to maintain a positive cash flow, where your income exceeds your expenses.
Let’s break it down further using the example of Aqsa:
- Part-time job income: $2000
- Take-out food: $500
- School: $300
- Entertainment: $15
- Transit: $126
- Rent: $1000
Remaining cash: $59
Positive cash flow is good, but it’s not ideal. Unfortunately, 17% of Canadians admit their monthly spending surpasses their income, with 27% resorting to borrowing for daily expenses.
Strategies for Improvement: In Aqsa’s case, her goal is to save for future endeavors, such as paying off student loans upon graduation. To achieve this, Aqsa needs to reevaluate her expenses. For instance, cutting down on dining out and opting for grocery shopping can save her money. If Aqsa manages to reduce her restaurant spending by $200, she can allocate those funds to her savings, inching closer to her financial goals.
The Road to Financial Freedom: In the upcoming section, we’ll explore strategies for Aqsa to tackle her debt effectively. Stay tuned to learn more about empowering financial decisions and achieving financial freedom.
Conclusion: Budgeting is not just about restricting spending; it’s a powerful tool to take control of your financial future. By understanding where your money comes from and where it goes, you can make informed decisions that align with your goals. Join us in the next segment as we guide Aqsa on her journey to financial empowerment and debt freedom.