A realistic budget provides an invaluable way of tracking your spending and managing your household expenses. A budget enables you to take control of your personal finances and tell your money where to go instead of wondering where it went. If you are new to budgeting it can take some time to find a way of managing your money that works for you, but these tips should help you to get started.
1. Set Goals
Budgeting often means making changes to your lifestyle and when you first make these changes it can be difficult to stick to them. Taking some time to sit down and think about why you have decided to budget in the first place will help you to stay motivated while you become accustomed to the changes you are making.
2. Track Spending
In order to create a budget you must first know where your money is going. Tracking everything you spend for two to four weeks will allow you to see where you could make savings and give you a realistic figure for budget categories such as grocery spending and petrol.
3. Create a Written Plan
Write down every expense that you have and assign an amount to it based on the results of your spending diary and your regular bills. Include everything from mortgage payments and utilities to subscriptions and insurance.
4. Allow Some Wiggle Room
Don't forget to leave room in your budget for small unforeseen expenses. Add a small amount into your budget for miscellaneous expenses such as spending more than your budgeted amount on petrol due to having to visit a relative in another town.
5. It's a Team Effort
Unless you live alone, everyone in your household needs to be on board with the family budget. Create the budget together and ensure everyone understands why the budget exists. This will help to eliminate tension and the feeling of sacrifice or hardship that families often experience when changing their lifestyle.
6. Don't Forget Rainy Days
It is going to rain, so you need to plan for the rain. Ensure your budget includes a category for savings and start to put what you can afford into a savings account each month. This provides peace of mind and it's empowering to see your money grow while you stay on track with your spending.
7. Eliminate Debt
If you have high-interest debts it's vital that you start looking for areas in your budget to cut back on in order to pay off your debts. Paying interest on debt is simply taking money you have earned and giving it away. That money could really allow you to increase your savings and reach your goals quicker, so make a plan for eliminating the debt.
8. Separate Wants from Needs
Consider what is essential in your life and what you just enjoy having or doing. There are usually areas that we can all cut back on and after keeping a spending diary you may find that you don't really want some of those things you've bought when you see how much they total.
9. Switch Suppliers
Use comparison sites to check whether you could save money by switching suppliers for utilities such as gas and electricity. Lowering these expenses will allow for more wiggle room in the rest of your budget and the difference could even be used to make extra payments on your debts.
10. Check Affordability
When making large purchases for example a new home, utilise online calculators such as those provided by Simply Finance to check affordability. The calculators will help you establish what your monthly payments would be and allow you to run the figures through your budget to ensure you will be able to keep up with your other commitments.