Sorting out an effective budget can seem like a lot of hard work, but with a few simple strategies you can plan an effective budget that will keep your spending under control for the whole year.
The most important thing to remember when creating a budget is not just to budget for one month and then keep this standard amount for the entire year. Each month will be different, and you will have to factor in things such as Christmas, weddings, birthdays and holidays where you will be spending more than in a normal month. If you fail to factor these in then by the end of the year you will be confused as to where all your money has gone.
After you have considered this fact, the next thing to do is to sit down and plan it out. Use a spreadsheet such as Microsoft Excel if you have it, although OpenOffice is a free version that is just as suitable for the task.
The essential aim of the budget is to work out your incomings – which will probably stay the same each month unless you are in a job where your pay can fluctuate, such as being self-employed – and your likely outgoings. Write down everything that you can think of, perhaps dividing them up into the essentials and the non-essentials.
For example, things such as gas, electricity, mortgage, rent and insurance are not things that you can do without, so put those in first. Then fill out sections on everything else that you will spend money on, including food, socialising, travel, magazines and treats, until you are fairly sure that you have covered everything.
If you don’t know the monthly amount that you spend on something, write in the weekly amount or quarterly amount (as will be the case with bills), and you can then perform simple equations to work out the monthly amount of each.
Then look at the coming months, and think about how much you will spend on presents at Christmas, how much you will spend on your holiday, wedding, party, etc, and factor all of these in as well.
From all of this information, you can then work out an overall monthly budget, showing how much you spend compared to how much you earn. You will clearly be able to see whether you need to cut down on your spending, and you can then factor this into your budget as well.
For example, if you are spending £20 a week on magazines and you want to get this down to £10, then write this down in the column next to it. Keep working at this until you have managed to get the amount down to the amount you need, and then make a note of all the things you have to cut down on.
It is also a good idea to factor in unexpected events, and to try to have some money put aside for these. People get married, die, have babies and become unemployed all the time, and you may find yourself making an unexpected trip or buying an expensive present. The important thing is to be prepared for these and to re-evaluate your budget all the time to see if you are successfully sticking to it.