Budgeting is a boring but necessary tool for planning your personal finance and ensuring that you are able to save money whilst being able to afford to buy everything you need without having to resort to obtaining credit and debt by way of overdrafts, loans and credit cards. By planning future expenses, not only will you stay in control of your financial situation, you will also be able to save enough money to buy a car, a house or hire a financial adviser who will help you pick the best strategy for you.
Beginning to budget – creating a spreadsheet
You can start a simple budget by creating a spreadsheet of both your income and your outgoings. Start off by creating a spreadsheet detailing your income, since this is the most simple and least likely to be affected by decisions. On it you should create column headings for salary, extra benefits, interest paid and other income and then decide whether you wish to calculate your budget on a weekly, monthly or quarterly basis. Whichever you decide, in the rows, enter the date for each period.
Now input the figures. If you have a monthly salary, this can be inputted automatically, and if you expect to earn overtime, put this in the ‘other’ column so you know that it is expected but not to be relied on.
On another page you can list your outgoings. This is more difficult since most people spend different amounts each month, depending on whether they buy certain luxuries or whether they attend events or occasions. Start by including your rent or mortgage, your utility bills, telephone and mobile bills, bank charges, charity subscriptions and everything else that remains constant each week or month. Use the same period headings as you did with your income, so if you are paid weekly and wish to have a weekly budget, but your bills are monthly, you will need to either split them into 4 weeks or include them in the week they are usually paid. The latter option will help you spread out large payments better.
Estimate fluctuating expenditure – nights out, buying new clothes, etc, and don’t forget to include small, often forgotten about costs, such as petrol or public transport.
Keep a spending diary
For a few weeks at least, keep a diary or notebook record of everything you spend. This will highlight any extras you buy regularly, such as that £ 2 coffee you buy twice a day, or those DVDs you buy almost every shopping trip. So doing, you will be able to see where most of your money goes and find a solution to reduce your expenses, whilst setting new saving goals.