For most of us, more money flows out our accounts a month than flows in. The only way to get financially healthy is to set up a realistic budget.
Just like watching your diet helps your body run in top shape, budgeting helps your money work for you. Your budget is a plan for what you are going to do with your money. If you’re like most people, more money flows out a month than flows in, and the only way to get financially healthy is to set up a realistic budget to help you manage your money. But where to begin?
Step One: Spend a month carefully writing down all your expenses (see example below). That means every debit order, debt that you’re paying off, that chocolate you just bought at the petrol station: every cent spent must be written down. This will give you a clear idea of your spending habits and exactly how much money you give out on what. (Don’t forget to include fixed expenses like rent/telephone/electricity).
Step Two: Once you have a clear idea of your spending (in the ‘current’ column), you will need to calculate how much you have spent and then have a look at your salary. We guarantee you that no matter who you are, there’s going to be room for improvement in how money flows out of your account. You can have a look by drawing up a list that looks like this:
If you’d like to download an interactive PDF, click here.
To work out your amended expenditure it is always useful to keep in mind whether the thing you are budgeting for is an Essential Expense (something that HAS to be paid for survival – like rent and utilities), a Non-Essential Expense (something that is necessary, but flexible like food/telephone/insurance), or a Luxury Expense (something that you would like to have but do not need -like TV packages). You should also be budgeting at least 5%-10% of your salary into savings each month to build an emergency fund for if you need some extra money down the line.
Once you’ve worked out the amended expenditure, all you have to do is stick to it! This can be easier said than done, so take a look at our tips to stick to your budget once you have set it up!
Sticking to Your Plan
Once you have a good idea of what your finances actually look like, it is much easier to control them and bring them to a healthy place. A budget is only helpful if you can stick to it!