How to Create a Budget
How to Create a Budget
Always running out of money by the end of the month? “Just create a budget!” How many times has someone bestowed this well-meaning advice? Although this seemingly simple approach may sound straightforward, establishing a budget and sticking to it, doesn’t always go to plan. Whether you’re hoping to create a personal budget spreadsheet or just have a handle on your money after Christmas, here’s a few tips to start 2019 on the right foot.
Creating a budget is a great way to help you feel a bit more in control. It also allows you to save money and track your areas for change. Here are 10 steps to creating, managing and sticking to your personal budget every month. Don’t forget to build in a small reward for when you keep to your budget.
First things first. Identify the amount of money you have coming in. If you have an income that changes every month, you will need to set up a different style of budget and learn to manage your irregular income carefully. It is important to know exactly how much you have coming in so that you know how much you can afford to spend.
Track Regular Bills
Then make a list of the regular fixed bills such as your rent or mortgage, utility bills and anything else that costs you the same amount each month. Reviewing previous bank statements is a great way to ensure you don’t miss anything out.
Next, list all your variable expenses. Items that change from month to month: costs to run a car, food shopping, hobbies, special occasions or social events. Plan ahead for birthdays or other events and set a budget for spending on each of these.
Rainy Days and Sundays
It’s always worth putting a small amount aside for a rainy day. Any seasonal expenses such as Christmas, birthdays or the summer holidays. Putting aside some money for these occasions ensures you don’t overspend or run out of cash. Rainy day savings are also handy for unexpected expenses such as car repairs.
Record your daily spending in whatever way works for you – a pen and paper, your smartphone or try an app. (Read our 7 money saving apps blog for ideas.) Either way, ensure you record everything you spend each week, even the little things such as a drink purchased on the way to work.
Setting Your Goals
Make a realistic list of all the financial goals you want to accomplish in both the short-and long-term. Short-term goals should take no longer than a year to reach and long-term goals, such as saving for retirement or mortgage, might take a few years.
Tweak any Unhelpful Habits
Once you’ve documented all of your spending, you can start to see where you have money left over or where you can cut back and move money to put toward your goals. Anything you want but don’t need are the first things to highlight. Do you need those weekly pedicures, or can do you it yourself at home? Can you skip that dinner out and host a dinner party at home instead? These sort of things can be saved as little treats for sticking to your budget.
Doing the Maths
If your totals still aren’t adding up, you may need to look at adjusting your fixed expenses. Can you switch to a cheaper phone contract or shop about for a better deal on your utilities? Little changes can make a huge difference to your disposable income each month.
Another option is to find a way to increase your income through an additional job or looking for a better paying job. You can evaluate at the end of every month and make changes for the month ahead. This will help you adjust your spending as your life changes and your spending increases in different areas.
It’s important that you monitor your budget regularly to make sure you stay on-track. Small savings do of course add up to a lot of money, so don’t overlook the small stuff. You might be surprised at how much extra money you accumulate by making one tiny adjustment at a time.
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