Skip to main content

Budgeting 101: How to write your First Budget

Times have been hard for a while now; in fact it’s getting pretty boring really. But hard times don’t really need to be as bad as we make out – anyone can make them wealthier just by taking the time to manage their finances better.

So today it is time to take charge of the situation, sit down, look at your money (not literally, although feel free if that helps) and put together a budget. This budget will be your plan, if followed it will help you out of debt and into financial security.

Bills and Monthly Outgoings

You probably already know how much you earn, and I’m guessing you have a rough idea about some of your expenditure, but probably not all of it. Many people have literally no idea how they spend so much each month and that’s a problem.

OK, so first of all we are going to put together a list of your regular monthly charges.

So start by listing all the obvious things – rent/mortgage, heating, car payments, insurance – anything where you know that you are paying a set amount each month.

Now go through your bank statements and double check to see what you might have missed, or fill in any blanks if you weren’t sure about the exact amount you are paying.

General spending day to day

OK, so that’s the easy stuff, but what about groceries? Entertainment? All those things that can vary from one week to the next.

So now we are going to go through those past bank statements again. Ignore those monthly bills, but every single bit of normal day to day spending, note down what it was for and how much you spent.

Now give each item a category, try to pick categories appropriately, but feel free to go back and combine categories or create new ones if needed. Some example categories might be:

Work lunch, clothes, nights out, food shopping etc...

Also consider travel costs. Things like buying foreign currency, air tickets, hotels etc should be totaled for 12 months and then divided by 12 to give you an approximate monthly spend.

Wages and Income

Quite simply, note down what your monthly income is. If your income varies from one month to the next collect up as many previous pay-slips as possible and work out an approximate average income.

Putting it all together

Finally, you can put together a spread sheet noting down all of your income and outgoings each month.

Section one will show your income, section 2 should show your monthly bills, section 3 should list your monthly spending by category (those categories you created earlier).

You can then total up each section and get your monthly cash flow total – hopefully it will be positive.

How to use it

Simply enough, your goal should be to improve that bottom line figure – how you do this is up to you; if you see any categories where your spending seems higher than expected though, that is the place to start.

For more information about money, currencies and finance please visit my website here.

Comments

Popular posts from this blog

Low interest credit cards - how to make them work for you

Credit cards are borrowing instruments, unlike debit cards where you already have the money. Banks are there to make money too. Just like high street stores, they hope to maximise their profits within the rules. So it’s important to understand the basics and find a credit card that’s right for you – you can compare low APR credit cards here . Now you know the rules, let’s find out how to play the game. The financial services industry charges interest on the money that it lends out. Let us assume you borrow £100 on your credit card and keep it for exactly one year before you pay it back. For the purposes of this article, we will assume your loan attracts 8% interest per year, which is the Annual Percentage Rate, or APR for that particular transaction. Practical example

Why it’s important to save for retirement

While retirement may seem far off in the distance for some, financial experts say you’re never too young to begin saving.  In fact, the earlier you calculate your retirement needs and start building your nest egg, the easier it will be to create a viable plan for the future. Many experts advise you begin saving a percentage of your income for retirement as soon as possible, no matter how little the contribution may be, as it’s possible the Social Security benefits millions of people currently depend on may be in jeopardy.

What are the Consequences of Overspending in Life?

How overspending can ruin your financial life? With today’s expenses and their prices, it can be very hard not to overspend. Still, that isn’t an excuse to stray out of your budget. You know why? It is because overspending can only lead to more problems than you think. Overspending can affect your whole life. With all the possible consequences, it may jump from one problem to another. Unpaid bills All the excessive shopping with your credit card can cause steep bills at the end of the month. If you keep on using your credit but don’t have enough money to pay for it in the end, then you’re surely in for a huge financial disaster. This will turn out to be missed payments, and missed payments will ruin your credit report. Missing out on payments will get your credit report marked for 7 years or more. And you can’t get rid of them by finishing them off. Credit report Overspending can cause a chain reaction of events. Once you get your bills due to overspending, it’s possible for you to mi

The Top 4 Reasons People Fail at Budgeting

Budgeting isn’t easy, and many people experience difficulty trying to get the most out of this essential financial tool.  While the concept may sound simple, adhering to your budget could be a lot harder than you might think.  To help you experience success, here are the top 4 reasons why people fail at budgeting .

How does a Prepaid Credit Card work?

Can They Really Be a Solution to Avoiding Credit Card Debt? When it comes to plastic, there are a lot of choices out there. Not only do you have the choice of credit card , debit card, or prepaid credit card, but you also get to decide which financial company you want to use as your card provider. Credit cards and debit cards are both risky. Credit cards can help put you deeper into debt, while debit cards give thieves and collectors access to your entire bank account. A growing number of people are finding that prepaid credit cards are becoming the best option. What Are Prepaid Credit Cards? Prepaid credit cards look and act just like a credit or debit card, except you put the money on the card before you make any purchases. You are only allowed to spend as much money as you have pre-loaded on the card, which means that you are not at risk of going into credit card debt from overspending. These cards also keep your money safe, because thieves will be limited to the amount that is on t

How to Make Your Title Loans Safe and Sound

Although title loans are tagged as risky, innumerable folks still use them for fulfilling their different financial obligations. Therefore, such loans are not completely bad because their significant use despite the risk factor says a lot of their pros. This makes it vital to discuss how these loans should be used so that the risk factor can be minimized up to a great extent. For those who are not aware of, the risk of title loans crop up in the form of consequences when you fail to pay back the loan. With such a failure, you are surely going to lose your car as well as decrease your credit score further.

How Equipment Loans can help your Business Thrive

Image via gettyimages Different companies enjoy common benefits from capital equipment. Machinery has direct and indirect effects on your bottom line. A new oven and forklift each make your business more productive. Meanwhile, interest and depreciation expense are tax write offs that indirectly improve business profits. However, your business may not qualify for a general purpose loan to buy much needed equipment. Some obstacles include: