The very mention of the concept of budgeting when it comes to talking about your personal finances, will probably have plenty of people quickly glazing over and stifling a yawn, but without keeping tabs on your cash, it could be a challenge to stay on top of your money.
There are short term options like Captain Cash if you need some extra money to pay a bill, and you can learn how it works on their website. Looking ahead, however boring you think the word budget actually is, there is a lot of sense in getting a monthly plan in place that you can live with, and stick with.
A budget is a financial plan that is designed to help you take greater control of your finances, and getting into the habit of recording all of your monthly expenses is an excellent way to make you money go further and to stop you overspending.
There are a number of key indicators that if they apply to your finances, are a good sign that you would benefit from working out a budget.
If you constantly find that money is a bit tight and you don’t know where your money is going each month. If you are constantly struggling to pay bills on time and clear your debts, or you can never get enough money together to put some savings away, these are classic issues that a household budget could potentially resolve or at least improve.
A budget is simply a matter of creating a list of all of your expenses, so that you can see exactly where your money is going and whether you are currently living within your means.
What you want from a budget
Whilst a budget serves a basic purpose in general terms, you can adapt this form of financial planning to suit your specific financial goals.
Before you start creating your own budget, take a moment to think about what you want to achieve from your plans. It might be that you want to try and clear your debts or it might be that you are saving for a big event or specific item, or it could be that you are trying to make plans for your retirement.
Having some goals and targets in mind that matter to you, will definitely help to define the reasons why you are putting a budget together in the first place, and provide you with the incentive and discipline to stick with it and watch your plans take shape.
Working out your monthly income and expenses
It is often easier to work out your budget based on monthly figures, especially as a lot of your regular bills are paid monthly rather than weekly.
If you get paid weekly or fortnightly rather than monthly, simply multiply your weekly cheques by 4.33 and multiply fortnightly payments by 2.167. If you have a sporadic income but know what you will earn over a 12 month period, simply divide that total by 12. These formulas work to give you an accurate monthly income figure and will allow you to start your calculations from a solid base.
The next step is to write down all of your expenses each month. Keep receipts for everything you spend and don’t leave anything out.
There is sometimes a temptation to disregard small amounts spent on coffee’s and other relatively small purchases, but these figures can soon add up to a significant amount each month. Identifying these classic indulgence expenses is often quite illuminating when you put your budget together, and it helps you to see exactly where all your money is going.
Working it all out
Once you have all of your income and expenses down on paper or on a spreadsheet, this is the moment of truth, and you can see whether the figure is positive or negative.
A negative number is the wake-up call your finances need, as it illustrates that you are spending more than you are earning. Even a positive number might show you that there is room for improvement in your spending habits.
Whatever the outcome, the exercise of putting all your finances under the spotlight and recording all of your income and expenses can give you a much greater feeling of control over your money.
Budgets suddenly don’t seem so boring anymore, so get to work on a monthly money plan that you can live with.
Joseph Faulkner writes articles based on personal finance topics. He learnt how to make, and live by, a budget after he was made redundant 2 years ago and his wife was pregnant with their 2nd child. He shares his tips and hopes to help others.
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