Budgeting your Money
Budgeting your money need not be an arduous or tiresome task. It is basically way of taking control of your finances and regulating your income and expenditure. Even if you are in debt you will find that setting out a budget plan will help you to effectively see where your money is going. You should also be able to see how you can make some changes that will be beneficial financially.
The Basic Rules of Budgeting
When setting out a budget plan you need to be completely honest about your financial standing; everything must go down in the budget. Having a realistic approach to how much you spend on daily and monthly basis is important. People tend to forget about items such as transport fares and lunchtime sandwiches at work. These items do add up over the course of a month and should all be figured in.
If you are part of a family and there is more than one person who financially contributes or who you spend money on, such as children, then these figures need to be included. If your budget figures are realistic it will be much easier and more likely that you will stick to it.
Assessing your Income
Work out exactly how much money comes into your household over the course of the year. For most people this will come in the form of an annual salary, make sure that you put down your net salary and not your gross. Also figure any income such as investments that pay off dividends during the year. Do not include savings; although these can be seen as investments, they should be used for emergencies, if they occur.
Assessing your Expenditure
Now comes the hard part; working out exactly how much you spend every month. This will require some brainwork and research as everything needs to go down in the budget. You can separate expenses and give different headings such as priority expenses, which are electricity bill, telephone bills, mortgage payments, credit cards and loans, transport costs, and council tax payments.
Another section can be for household bills such as food, toiletries, and even the newspaper bill. There should be a section for items such as clothes, leisure and entertaining. If you are a member of clubs such as online DVD rentals then these should also be included in this section. You may also want to put in a figure for emergency expenses such as dental bills.
Cutting out Unwanted Expenses
Once you have totalled all of your incomings and outgoings you may want to think about ways to cut costs. Take a look at how much you are spending on the interest of loans and credit cards. Would it be cheaper to pay off these high payments quicker or altogether using some of your savings? If you can, always pay more than the minimum amount required by credit cards as this will reduce interest payments.
Take a look at your spending habits and see if there is any realistic way you can cut down. Making your own sandwiches for lunchtime will only cost a fraction of the cost of store bought. Shop around when buying food and use supermarkets instead of the more expensive corner store. Try renting DVDs instead of buying them; are you really going to watch that film more than once? Some of these ideas may seem penny pinching but cutting costs really does make a difference when planning your budget.
Sticking to the Budget
One of the hardest parts of budgeting your money is actually sticking to the budget. Being realistic about your spending will make it easier. Don't forgo luxury items altogether as this will only increase your impulse to splurge if you see something your really want. Sticking to your budget for a few months and cutting costs should increase your income. You can then spend some of the money saved as a reward that will act as a budgeting incentive.
Budgeting your money will take discipline at first but it really is a way to take control of your finances. Don't get discouraged if find yourself slipping at first, this should be an overall annual plan and you should review your budget each year. In the end you should find your budget taking care of itself if you have stuck to your initial plan.