What springs to mind when you hear the word, ‘budget’? There is a misconception out there that having a budget means having to stop spending on non-essentials and only buying essentials. However, in reality, having a budget allows you to properly manage your finances so that you can live comfortably and within your means.
Put simply, learning to budget means learning to track spending habits to ensure less is going out and more in staying in your bank account. Learn how to start creating your budget in this post
Please note that this post contains affiliate links. This means that in the event of a sale, I may make a small commission. Don’t worry, this won’t cost you any extra and I only recommend products I use and love myself. Your support is appreciated!
Budgeting and creating a budget isn’t just limited to those that are struggling to live within their means. Everyone should have a budget so they can keep an eye on their finances.
The benefits of having a budget include:
- Making informed decisions about allocating where your income is going. For example, retirement, bills, savings etc
- You can see exactly where your money is going
- You can budget for the short term (month to month), midterm (holidays, buying a car) and long term (retirement, children’s education).
Action Step: Create a spreadsheet (or even a simple piece of paper) that has your current income, projected income, expenses and possible future commitments. This will give you a basic overview of your finances and give you a good place to start working out a suitable and manageable budget.
How To Create A Budget
Does the thought of actually sitting down and creating a budget fill you with dread? Mmmhmmm. I hear ya. Look at it this way, it can be a tedious task buuut once it is done (and you stick to it!), it will keep you on track to being a Financially Health Adult. Huzzah!
Now you get to do the fun task of creating your budget!
- No lies. Try and be as accurate as possible when making your budget. You need it to be realistic. Withholding information or presenting distorted and incorrect information will not benefit anyone.
- Compile all your financial statements including bank statements, bills, investment accounts and any other sources of income or expenses. The more information you have, the more accurate your average monthly spreadsheet will be.
- Keep an up-to-date version of all sources of income. This may vary if you are self-employment or for those in business.
- Create a very detailed list of monthly expenses created. Every detail should be included no matter how small or seemingly insignificant (yes, including those late night Cornershop chocolate runs). Include things such as mortgage payments, car payments, auto insurance payments, groceries, utilities, entertainment, dry cleaning and laundry expenses, auto insurance, retirement, college allocations, saving and essentially anything and everything that you spend money on.
- Total both the income and expenses based on monthly calculations and then make the adjustments where necessary, especially if the expenses are more than the income. Make cut back or cut out wherever possible.
A few tips when creating your budget:
On a budget sheet, indicate in the relevant categories all the required information needed. Ignore categories that don’t apply to you. Add extra categories if you need to.
For property tax, auto insurance and any other expenses that don’t normally fall into the monthly billing category take the total cost of it per year and divide it by twelve and then add it into the budget worksheet.
When you are just starting out or have a very tight allowance, calculate only the minimum payments required. You can always add to this once your bank balance is looking a little less starved.
For expenses such as entertainment, groceries and eating out, use a separate spreadsheet to work this out. Base this on the previous few months to get an idea of your average spend.
Be a successful budgeter
Keeping the budgeting exercise as simple as possible. No drawn out, boring loooong meetings. Do it in spurts if you need to.
Don’t categorize too much but remember to still maintain some semblance of accuracy. Having 2 – 5 categories would be ideal for working out a good budget easily. However, name your categories well. No miscellaneous hiding your new expensive pair of shoes with matching handbag in vague categories hoping no one will notice.
Having clear categories will also help you see exactly where all your moolah is going.
Tailor your budget to suit your needs and the needs of your family. Getting templates online is a great starting point, but make sure to change it for your own personal needs.
Have a specified amount for personal needs and sudden expenses clearly outlined and no cheating. Be mindful that you don’t have to spend your allocated allowance either.
Make provisions for major expenses that may crop up throughout the year. For example, you may need a windscreen replaced on your car (sigh, stupid windscreen).
Oh boy, this is a common problem for many people (myself included)! You can overcome this though. I believe in you (insert fist pump here).
Here are a few tips that can help you curb that spending:
- Try to keep yourself aware of how much you are actually spending. Keep your receipts and write them down in a notebook or similar every day/week. Whichever works best for you. Write down everything and I mean eeeeeverything! You’ll be surprised at how quickly all those little spends add up without you even noticing.
- Avoid impulse spending. Most impulse buys are done on a whim and without actually thinking it through. In most cases, the items are either used for a short period of time or not at all. Try waiting a day or two before actually committing to the purchase. This will give you time to have a good ole think about it. If it is still consuming your mind after a few days you can reconsider.
- Don’t spend time in places where the urge to spend is real. For example, if you find that every time you go to lush you end up buying something even though you already have 73 bath bombs at home, maybe avoid going there for a while.
- Have clear objectives when going out shopping. Try writing a list of things that are needed before heading out.
- Consider what you are currently spending money on. Are they necessary? Or habit?
Try Using Cash
Most people tend to use plastic nowadays, while convenient, it often doesn’t feel like you are spending money because you aren’t physically handing any over.
Try giving yourself an allocated amount of cash for the week and see what happens. You might find that you are more reluctant to hand it over. It will also give you tangible evidence of how much you are actually spending each week. This isn’t always possible when you use your card for everything.
Remember the most commitment demanding budgeting is the long term one where fixed funds are set aside for retirement plans, purchasing of property, children’s education programs and such where the committed amount is significant and has to be sustained for a long period of time. However, if you start small and gradually build up, you can do it!
You may also like
- Bullet Journal 101
- 30 things to stop doing in your 30’s
- How to create a new habit – and stick with it!
- Goal setting for success – The ultimate goal setting guide!
- 4 ways to keep your credit card under control
- The NZ Government website has a list of community services that can help you with your budget from free phone call services to face to face services to support groups
- Money Talks is a free financial helpline that can link you up with a financial mentor
Pin for later