When asked for financial help, the first question that invariably is asked is, “Let me see your budget.” What follows is, almost without fail, a blank stare and a shallow excuse about why the family doesn’t need a budget.
Stifling a sigh, the financial advisor gives the family the same advice as will be given in this article. You need a budget. It’s as simple as that. You need to know where your money is going in order to maximize your money’s potential. What does that mean?
Simply put, it means being able to pay cash for your next family holiday, not putting Christmas on the credit card, and relieving the stress that money has built between you and your spouse. So where do you start?
The first step is possibly the longest and potentially the biggest deterrent for anyone not determined to make a budget and stick with it. First and foremost, you need to track your spending for one month. Getting a Notepad or even better a budget planner makes this easier.
List categories where you spend your money: rent, mortgage, insurance, food, car or travel costs, and electric are some of the most basic categories. Then list how much money within the last month you spent out of each category. See if you can trim any of those numbers down.
Next, set up your budget. What this means is giving each category that you listed in the first step a monthly amount that you’re allowed to spend on that category. If your rent is £750/month, then your rent category should be given £750 each month in your budget. Some categories may be harder to estimate, such as electric and gas, but using a yearly average is a good practice.
If you have young children or a baby there are some great tips to save you money in this baby on a budget planning guide.
The last step is implementing your budget. There are many ways to do this. You can use online tools that allow you to track your spending throughout the month, you must be diligent in updating your information in order for your budget to work.
Once you have spent the amount allocated to each category for the month, then you can’t spend any more money in that category until the next month has come. As you get better and better at sticking with your budget, you will find categories that you can cut back on, and other categories that you may want to add, like saving for the next family holiday.
You will find that your money can go further and you will be able to pay off your debts more quickly if you are strict with your budget and trimming excess from it. Before you know it, you will be out of debt, paying cash for all of your purchases, and sleeping easy at night without worrying that the next debt collector is coming to repossess the debt you owe him.
