Budgeting – Where to Start...

If you have never set up a budget before, it can seem like a daunting prospect: “How do I decide how much I can really afford?”, “Where can I make cutbacks?”, “How can I keep track of my spending?”, the list goes on.

This article aims to provide the basics which will allow you to set up your own budget & start controlling your finances, instead of the other way round.

Deciding how much you can afford
The first step in any budget is to work out exactly what you have coming in & going out. Make a list of your current monthly income. Be sure to include any part-time jobs, benefits and/or child support payments. Then write down all of your monthly expenses. Again, be sure to include everything. If you are not sure about the exact amounts, save up all your receipts for a month.

The next step is to subtract your expenses from your income. The figure that is left is your monthly ‘disposable income’. If the figure is a negative one, this means that you have more going out than you have coming in. If this is the case, you need to seek professional financial advice as soon as possible.

Making cutbacks
If your disposable income is not enough, or you want to start saving some of this money, you could look at ways to reduce your spending & free up some more money. The most obvious areas are shopping bills, television packages & mobile phones. You could try a few supermarket own-brands, as these are often just as good quality, but a lot cheaper. Could you reduce your TV subscription or maybe downgrade your mobile phone package? These are all ways in which you can save extra money every month.

Keeping track
In order to make the budget successful, you need to log everything you spend so that you can avoid going over budget & if necessary, spot the areas where you are overspending & make appropriate cutbacks. You could record everything on a spreadsheet, keep all your receipts, or simply write everything on a piece of paper. Whatever method you choose, this is an important step.

At the end of the month, hopefully you will have stayed within budget. Even if this is the case, look back at what you have spent. Could you cut back even more? Could you refine your budget in any way? Always look for ways to save more money.