You’ve decided to take control of your finances by budgeting, but you aren’t sure where to start.
Should you take a guess at how much you spend on groceries? How will you know the “right” amount to spend on gas?
Here are a few tips that can help you create your first budget:
1. Start With Your Income –
Budgeting requires you to know how much money you take home each month. If you make the same amount each month, this step is easy. For the self-employed or those with seasonal jobs, this step is a bit more difficult. Take your annual earnings and divide by 12 to see how much you have to work with on a month-by-month basis. You’ll also want to do the same with any irregular income you get (bonuses, dividends, and investments).
2. List Necessary Expenses –
Next, make a list of everything you need to pay each month. These are your rent or mortgage payments, your utility bills, and everything else you need to live. If any of your expenses are annual, divide them by 12 to get how much you need to pay each month.
3. List Unnecessary Expenses –
This is the money you spend on things you want, not what you need. These are still important, however, because if you don’t buy these items, then your life would be uncomfortable. These include eating out, going on vacation, or shopping for new clothes. If you don’t know the exact amount, make your best guess and then adjust as you keep up with your budget.
4. Combine Expenses –
Now add your necessary and unnecessary expenses together. Hopefully, they should be less than what you earn.
If you are spending more than you make, you have an emergency on your hands. Slash the unnecessary expenses immediately. This is the tricky part, because if you cut too much from one area (such as dining out), you’ll get discouraged. This leads to many forgoing your budget entirely. Don’t let this happen to you. Instead, make even cuts to your unnecessary expenses – such as 10 percent across the board — so that its easier to stick to your budget.
5. Make Savings Goals –
Any leftover income should go towards savings, but that might not be enough for your needs. Financial experts advise on setting aside 15 to 20 percent of your income towards savings. If you can’t do this, try trimming out some more of your expenses, or find ways to boost your income.
6. Monitor Your Spending –
Now comes the hard part, but its the one that brings the most reward. You need to track your actual spending habits and see how they measure up with your budget. Use a free app like Mint to monitor your progress.
Final tip: Relax. Your budget doesn’t have to be perfect, and you can always adjust it later as your needs change. The important thing is to set up a reasonable plan and stick to it.
At this time we are continuing business as usual however our team will now largely be working from home. This limits our phone contact availability. Customer support remains available Monday to Friday but please email in to firstname.lastname@example.org with your query. We aim to get back to you within 48 hours. On receipt of PPI refunds our fees remain payable and can be paid via our website www.oraclelegal.co.uk/payments/ or via BACS. We are also working on some other areas of potential claim for you in connection with your PPI and will be in touch shortly where applicable to present this to you.