Budgeting is something that most of us should be able to feel quite comfortable with but isn’t always.
It’s not always taught in schools, and your parents don’t always teach you how to do it. Sometimes, they won’t even do it themselves. So, how are you meant to know about the powers and benefits of budgeting? A lot of the time, we see budgeting as something that we have to do if we’re suffering financially. Because being ‘on a budget’ makes you think that you don’t have much to spend. However, this couldn’t be any further from the truth.
Budgeting is a very powerful financial tool. It allows you to keep track of your finances, maximize the money that you have, and even become successful in business too – so what’s not to love. However, you have to be able to get it right. Plucking a figure out of the air and hoping you can stick to it is bad budgeting and it’s not going to work. Instead, you have to learn how to budget and budget well in order for it to pay off. This means getting to know your finances in and out, taking control of them, and generally getting them to do what you want them to do. And yes, this does mean that you can often increase the amount of money that you have too. Here’s how you’re going to do it.
Understand your income
First of all, to make sure that you’re able to budget a whole lot better, or just get it right from the start, you have to look at your income. A lot of the time, you’ll have a figure in your mind of how much you earn, but is it really correct? It’s important that you know exactly how much money you’re going to get each month so that you can then create your budget accurately. So make sure that you are truly aware of the exact figure you get. Then, we can get started.
Getting to know your expenses
Next, you need to break down your expenses. Again, you may think that you spend, say $500 on bills each month, but when you get all of your paperwork out and check your bank statements, you may realize that it’s actually $800 because you’ve forgotten about payments! So next, you need to break down exactly what your average monthly expenses are.
Being aware of upcoming costs
But your average monthly expenses aren’t all that you need to get to know. Because you’ll often find that unexpected costs come up, and it’s great to know what you have coming up so that you can be aware of them for that month. For anything unexpected, you’re also going to want to have a plan. Sometimes, that will involve finding the cheapest or even free option, such as Marks & Harrison, where you won’t have to pay unless you get a result. That way, you can learn to budget better.
Tracking what you spend
Now it’s time to start tracking your spending. And it’s important that you do this before you set the budget because you need to know where your money goes at the moment to then filter it into the right place. Getting used to tracking your spending can take some time, so find your feet with it first.
Setting the right budgets in the right area
When you start to track your spending, you may be quite shocked at where your money goes. Because you had no idea that you spent so much on certain things. But now, you can start to control it and be sure that you’re spending on things that matter. So set your limits, and then stick to them as you track your spending every day.
Reducing your outgoings
From here, you should then look to reduce your outgoings – particularly if you seem to spend a lot each month. The trick to this is to negotiate your bills, as Riskology points out. When you’re able to reduce down the amount that you’re paying on your bills, you’re then freeing up more money for the areas that you want to be spending in.
Finally, you’re then going to want to make sure that you’re budgeting enough for your savings. Because that’s the beauty of budgeting, if you’ve got it planned out, then it’s a viable expense. And we all want to be able to ensure that we have savings behind us, just in case we need them. So this is what you’re going to want to do. By starting to budgeting savings into your monthly plan, you will suddenly have savings behind you, and that’s definitely something to get excited about.