Now might be a good time to look at your income and expenses. A budget may sound scary and hard work but it’s worth it in the long run. It lets you see what you have coming in and your spending patterns. Think of it is a way of working out what you really want out of life. Think about it, if you manage to spend less in one area, you can spend more on something else or even save up for that big holiday you’ve been dreaming of!
How are you going to set up your budget? You can use a spreadsheet or just a pen and paper.
1. Money in
Start by writing down all the money you have coming. Your salary, any benefits, any freelance or contract work, a side business. Is any of this regular income or ad hoc?
2. Money out
What regular bills do you have? Do you pay them monthly, weekly, quarterly? This list will include rent or mortgage, utility bills, mobile phone, internet, etc. You can then see how much disposable income you have each month.
3. Does it add up?
Now is the hard part? Does the income exceed the outgoings? If it does, that’s great but if you outgoings are more then you are going to have to do some work. See what things you can cut down on or get rid of all together. Even if you aren’t going overdrawn every month, this might be a good time to look at your expenses anyway whilst you’re thinking about it.
4. What do you want?
What personal financial goals do you have? If you write down your goals you are more likely to achieve them. Once you’ve written them down, you are going to have to find a way of working towards them. Does your budget allow you to save some money every month? What do you need to save to get where you want? Go back and see where you can cut some of that spending!
How about using cash all the time? It’s so easy to use your debit and credit cards but that makes it more difficult to stick to that budget. Having to use cash makes it easier to make you think, do you really need that coffee or new dress? Wouldn’t it be better in your savings? Those small savings can really add up.
Once you have made your budget, you need to keep checking it and updating it to make sure you are staying on track. Things change, that pay rise or your mortgage rate changes.
Good luck with that budget, it really is a useful tool to keep you motivated!