If you currently have very little idea about how much money you spend on a daily, weekly and monthly basis, it might be worth putting some time towards drawing up a budget.
A budget gives you full control over your money, allowing you to be more intentional with your purchases and ultimately save more. If you have financial goals for the future, a budget can help you to be more focused towards them, giving you a higher chance of success.
If you’ve never drawn up a budget before, don’t panic – it’s easier than you might think. Take a look at these five steps for inevitable budget success:
1. First, figure out what you earn
This may be easier in some cases than in others. For example, if you’re on a salary, it will be simple to figure out exactly how much you earn per month. But if you’re working off-contract, you freelance, you own your own business, or you often commit to overtime, knowing exactly how much you’ll bring in each month is near impossible.
Try to work out the minimum amount of income you can expect each month, which can then be adjusted on a month-by-month basis, depending on the circumstances at the time.
2. Commit to a monthly saving
Just as you’ve worked out your minimum monthly income, you now need to commit to a minimum monthly cash balance to put straight into your savings. Don’t aim too high here – being realistic is key. But when it comes to budgeting, you need to take this “untouchable” money straight off the table before you can consider how to use your leftover money for the month.
3. Calculate your expenses
The next step in the budgeting process is to determine exactly how much you’ll spend per month. This will, of course, vary from month to month, especially during birthday and holiday periods. There are some things you can factor in for certain, though, like your weekly shopping, phone bills, rent, energy costs, and travel expenses. Make sure to also consider additional costs like eating out, taking day trips and occasional healthcare check-ups.
4. Set a date to achieve your goals
No matter how short-term or long-term your financial goals are, you need to be clear with yourself on an exact date you want to achieve them by. Be realistic – if you can’t save £10,000 in a year, then don’t make that your aim. But having a clear idea on when you want to achieve your financial objectives will give you a bigger drive to work towards achieving them. Learn the best tips for achieving your financial goals at LetMeBank.
5. Track your progress
The only way to be consistent with your budgeting is to track exactly what’s being spent, and when. Document every purchase in an orderly manner – an Excel spreadsheet works well – and at the end of every month, compare how much you’re spending with your pre-existing expenses calculations. It might be that you’re spending more than you expected, in which case, you may either want to adjust your calculations or cut down on your spending.