When people hear the word ‘budget’ they often think about tedious mathematical calculations and an erosion of their spending power. Once you’ve learned how to budget, you’ll be proud of your at your newfound financial skills and confidence. Budgeting doesn’t have to be a painful process and our guide can easily help you create your own personal budget in under an hour.
After all, budgeting is about having a goal. Maybe your goal is to go on holiday, buy a new car, save for Christmas, or create a stable financial environment for yourself. By setting up a budget you can easily see how much money you have coming in and where it goes. Once you know this, you can make the savings you need to achieve your goals.
We’ve compiled 6 essential budgeting tips to help you learn how to budget your money more effectively. There’s no rush, so you can take your time. Just make sure to follow each tip correctly so your budget plan is 100% accurate.
1) Base a budget plan around your income
So, if you’re wondering how to create a budget, your income is the first port of call. You need to establish exactly how much money you have coming into your account each month.
If you work for a company and get paid a regular monthly wage, then this shouldn’t be too complicated for you. However, if you’re self-employed or receive sporadic wages you’ll need to factor this into your budget carefully. In this type of situation, it’s a good idea to work out your average monthly wage over several of the last quarters to see how your income varies throughout the year.
It’s important to remember to take into account an upcoming promotion as well as pension and tax deductions from your wages.
2) Work out your fixed monthly outgoings
When learning how to budget your money, you should always double check your fixed monthly outgoings. Your fixed monthly outgoings include everything that you need to pay month in, month out. Things like mortgage and rent commitments, car payments, vehicle insurance, utility bills, and other types of loans should be included here.
But, don’t forget that you’re learning how to create a budget so that you can save money. You should always try to save at least 10% of your income each month and this should be factored in with your fixed monthly outgoings.
3) Work out your variable monthly outgoings
Your variable monthly outgoings are extremely likely to fluctuate each month. Factor in your average spend on groceries each month as well as how much luxuries like dinners out, clothes, and entertainment cost you. Don’t forget that some seasonal holidays may demand a little extra money for presents, food, and clothing.
Variable monthly outgoings are essentially things that you can cut back on to help with your budget plan. However, you don’t necessarily need to stop spending money on luxury items completely. A budget isn’t about suffering; it’s about considered cutbacks and planning.
4) Now, see what you end up with
Once you’ve established the cost of your monthly outgoings, you can match them to your income. You’ll soon see if your sums add up and know where you stand. If you need to cutback, start looking at your variable monthly outgoings. However, if you’re still struggling after cutting back on the variables, you’ll have to work out where you can cut back from your fixed monthly outgoings. Don’t forget to funnel any spare money you generate directly into your savings account.
5) Create your savings plan
Now you have all the information in front of you and can see how much you can save each month. Think back to your goals and why you’re creating this plan. Just remember to be realistic with your income and considered in your cutbacks.
6) Remember to review and make adjustments
A budget plan isn’t something that you can forget about. You’ll need to routinely check whether you’re hitting your monthly goal and monitor if you’re overspending each month. You might find that you need to cut back on some of your outgoings to support others. Don’t worry if things don’t go to plan straight away. Simply review and make the adjustments you need to get back on track.
So, if you’ve got a goal and want to put an effective budget in place, simply follow our guide. You’ll soon know exactly how to budget like a pro and hit your financial targets with ease.
If you’d like to read more about how you can save money and avoid debt, take a look at our budgeting archives now. If you’re seeking expert help in managing your money, have a chat with one of our experts today. We’re here to help! We can help you with professional debt advice. Give us a call on 1300 368 322, chat with us online or fill in the enquiry form below. Our discussions are obligation-free, private and 100% confidential.