If you’re looking to improve your money management skills, this guest post has lots of top tips on how to get budgeting just right.
What is budgeting? Well, it’s basically making sure that you are spending less than you’re bringing home, and it lays the foundations for every financial plan. Budgeting isn’t all about restricting what you spend money on and cutting all the fun out of your life. It’s really just about understanding how much money you have, where it all goes, and then how best to allocate your funds.
Record your expenses
The first step to saving money is to find out how much you are spending. You should be recording all your expenses, as hard as it may sound. Once you have done this and have all your data, you can organise it into categories such as rent, petrol, food shopping and so on. Use your bank statements to help you out with this.
If you’re on a low income and don’t know how budgeting will work for you, check out the living on a low income guide by the Money Advice Service.
Make your budget
Once you have knowledge of how much you are spending in a month, you can then begin to organise your expenses into a budget that suits you. Your budget should match your expenses to your income, so that you are able to plan your spending and limit overspending. Be sure to include everything in your budget, such as expenses that don’t occur every month like car maintenance.
So, your budget is set up and all in place. Now you need to create savings within it. You should try to at least put away ten to 15 percent of your income into your savings. If your expenses are really high and you’re finding it hard to save much at all then it could be time to start cutting down. In order to do this, you will need to identify the known essentials and try spending less on them, or cutting some of them out altogether. For example, can you spend less on dining out and entertainment?
What are you budgeting for?
You should be making plans on why you are saving money. The best ways to save more is to set goals. Whether it is a down payment on a house, a holiday or a new car, figure out how long you need to save for and how much you will need.
After all your expenses and your income, your goals are very likely to have a big effect on how you are saving your money. Remember your long term goals though, like retirement; it would be a good and wise idea to start planning for that as soon as you can. If you prioritise your goals it will give you a very clear idea of where you should start saving and where you should be budgeting.
Cut back on your spending for trips out, look out for own brand items in supermarkets, or if you’re going for dinner, go for the cheaper option on the menu once in a while. Forbes have got some great advice on how to cut your food budget in half.
Picking the right budgeting tools
You’ll want to use the right tools for your budget in order to help you out. So, make sure you open a savings account. It will help you massively, and make it harder to dip into those savings and undo all your good work.
Once you’re in the habit of budgeting, it’s a good idea to check your progress every month. This will help you stick to your personal budgeting goals, and identify any problems you may encounter. Try out these simple ways to budget, and watch your money grow and life change for the better.
Have you got any budgeting tips you’d like to add?
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