We often hear that we should set a budget so that we can keep in control of our finances. This is something which we might wonder how to do. It can be difficult to set a budget for our necessities as we will always need to pay the bus fare to work, our rent and council tax etc but when it comes to buying luxuries, we can keep a check on what we are spending. Setting the budget can be a bit tricky, but it might be easier than you think.
Work out how much you can Afford
It is a good idea to start by thinking about how much you can afford to spend. You will need to work this out. So, you will need to gather together your bank statements and credit card statements for at least a few months, longer if possible, so that you can work it out. This might sound daunting, but it can be easier than you think. Start by working out how much money you have in each month. This should be the easiest place to start. Add up the money that you have in form salary and wages, benefits, interest, pensions and nay other way that you have money coming in. This may change from month to month so decide if you want to note down the average or the smallest amount.
Once you have done the income, you then have to look at what you spend. This might seem tricky, but you only need to look at the things you have to buy. So, this will include any loan repayments on emergency loans, rent or mortgage, tax, contracts, utilities, food, and necessary transport, toiletries, clothing etc. You may find it hard to decide what is necessary, but just think about it in terms of the items are either things you cannot live or work without, that you are committed to paying for or that your family need. So, although smart clothing may seem like a luxury, if you need for your job then it is necessary. Hopefully, after doing this and sorting through all of the things that you pay for, you will be able to establish how much money you will need for this.
If you take the amount you need to pay out away from the amount that you are paid, you will then find out how much is left for luxury products. Hopefully there will be something left or else you will have to have a different goal and work out how to reduce what you are paying for necessities if you can by switching providers etc or by earning more. If you do have money left then you are in the position to start thinking about budgeting.
Consider What you Want to do with your Money
It is good to start by thinking about what you want to do with the money. For example, do you want to save some of it and put it by for emergencies or to save up for save up for something large? You may want to use some of it to repay a debt you may have. You will probably want to spend some of it too. Consider how you are going to split it, so that you know what you will be able to spend. You may want to set up transfers for money to go into a savings account or to repay debts so that you are able to make sure that it always happens and you do not forget to make these payments.
Think About What Sorts of Things you Want to Buy
It is worth thinking hard about what you are going to buy when you have a limited budget. If you feel that you only want to buy cheaper things, then you will be able to save more money, if you want to. If you think that you will want to buy more expensive things, then you may have to save up each month until you accumulate enough money to be able to afford these items. It is also worth thinking hard before you do spend the money. You will have limited spending now so make sure that it is something that it is really worthwhile getting and that you will get a lot of pleasure from.