Budgeting is an important part of running a household, especially when starting out in life, when you don’t necessarily have a high income and when making some savings is especially important. So this post is here to help you take control of your finances and figure out what you are actually spending your money on:
Your monthly outgoings
The first step is to write down what all of your predictable outgoings are, this includes; rent/mortgage, gas, electricity, phone, internet, car payments etc… Look at your online banking (if you don’t this, get it) and go through your past 3 months statements to make sure you haven’t missed anything.
Start a spread-sheet with column for day of month and note down every payment going out (it’s going out, so put the amount as a negative) and what it’s for.
This bit is simple enough; again, enter it in your spread-sheet on the day you usually get paid if possible. If your pay is done 4 weekly then you will have to estimate your monthly income (4weekly income * 13/12) and enter it as being on the first of each month.
If your pay varies, look back over the last 3 months to see what you got paid, take an average and put that figure in. Don’t forget to use your after tax income.
Now start a separate section to estimate your other expenses, these are the things that are not so regular or predicatable – things like groceries, fuel, car maintenance, going out.
I would start by brainstorming all of the items that might go in this section (use the examples above to get you started), and once again, check your last 3 months statements and tot up all of your spending.
Putting it all together
Right, this is the moment of truth, using a couple of simple formulas you can add up your income and your outgoings and you will see exactly what you have left at the end of each month.
What we are hoping for is a positive number, if it is negative you have a problem which needs to be solved quickly. If it is a healthy positive balance, just make sure you start saving some of the excess.
Now that you know what your finances look like you can take steps to improve them. This is important regardless of your position, but especially if your cash-flow is in the red. Start by looking through all of your monthly outgoings and seeing if there is anything you can reduce – perhaps by paying off a loan outright to save on payments, or maybe by selling your car and swapping for a cheaper or more efficient model.
It is all about finding ways to trim off unnecessary spending without cramping your lifestyle too much, obviously the tighter your finances are the more ruthless you need to be. Knowing is the first step to healthy finances.
About the author
This post was written by Mark from Currency Converter – your number one resource site for everything related to money and currencies. Start your financial education today.