For most people, the idea of creating and maintaining a financial budget for personal income and expenses is usually nothing more than a fleeting thought, quickly replaced by the strong notion of them not needing one as they can handle their own expenses just fine. The truth is, however, that having a budget is not only a great help to those wanting to save more money, but it can also make saving and spending a lot less intimidating, especially when we’re saving for a big purchase down the road.
Running a budget doesn’t take more than a few minutes a week to properly maintain, and it allows you to gain full control of your own finances so that you’re never short of cash when you need it the most.
Where To Start
If maintaining an established budget is the easy part, then establishing it to begin with can be seen as the only real challenge. And the challenge here involves putting all of your finances together so that you can have a look at just how much money you bring in every month, and just how much money is spent. Financial statements that you will need include bank statements, card bills, utility bills, shopping receipts from the last three months, loan and mortgage statements, and any investment accounts.
The more information you can put together, the more comprehensive your budget will be right off the bat, making it simpler to keep track of income and expenditure in the future.
Doing The Calculations
This is where it’s time to break out the calculator and a piece of paper. Write the numbers down from all of the information that you have gathered, with a clean line between the money brought in versus the money taken out. Find out exactly how much you’ve got at the moment, and how much you’ve been spending. If you don’t have a fixed monthly income – working as a freelancer, for example – use the month where you earned the very lowest as your baseline. It gives you a better safety net of how much you could possibly make again in the future.
Create An Expense List
The next order of business is to create a list of all your monthly expenses. The following are examples that should be included:
- Car payments
- Rent or mortgage
Use all of the collected statements to get all the numbers that you need, and make sure to include every single expense.
Total The Two
With your expenses laid out, now comes the time to determine whether they outweigh your income. If they do, then you will need to sit down with each expense and calculate what you can reduce or cut out completely, but don’t remove everything – entertainment, such as Netflix or gaming sites, are important for our mental health. There are always things in our lives that we can do without, and it’s important to narrow them down.
Now you have the beginnings of a financially-sound budget, one that you will need to update about once a month, which should never take more than a few minutes at a time.