It can be difficult to keep track of your outgoings, especially when you lead a busy lifestyle. Losing track of your spending often leaves many feeling out of control and concerned. This is when it becomes important to budget.
Not only does budgeting allow you to keep track and control your money but, it also gives you a clear idea as to how you can make your money go further.
At Makinson & Co, our specialist team has years of experience when it comes to managing everything there is to do with finance. That is why we have pieced together this helpful guide to give you an understanding of how to budget.
1. Establish why you are budgeting.
You may choose to budget because you want to get a handle on your outgoings. Perhaps you are looking to plan for retirement? Or, you may be looking to save up for a particular luxury or occasion?
Whatever reason it may be, it is always good to use this reason as a driving force. Budgeting is hard, it is easy to be swayed into over-spending. That is why it is key to make a mental note as to why you are budgeting so that you can work towards achieving your financial goal.
Create short, medium and long-term goals. This helps make the process more achievable and rewarding when you meet said goals.
2. Work out your expenses.
It is important to be realistic with yourself when creating a budgeting plan. If you rent, have bills, travel costs and other expenditures that you are tied to, then include these in your plan. Expenses that are not necessary are the areas in which you have room to make savings.
Once you have established the basic amount of your finances that you need to survive, you will be able to work out how much room you have to save and budget.
3. Identify spending leaks.
Once you have your basic set-in-stone expenditure calculated, it is worth identifying your spending leaks. These are not always large sum items like clothing, technology and experiences. They can be small but frequent expenses such as coffee dates, shop-bought lunches and subscriptions.
Where possible, reduce these small frequent expenses. This often can require lifestyle adjustments, which can be tricky at first but will soon come naturally.
Being aware of your spending habits is key to having a successful budget plan that you can achieve.
4. Create a savings account.
Having an account where you can transfer any savings you make can help with keeping to your budget. Even if you manage to save more than what you projected, move this money aside. It is very easy to see ‘extra’ money as spare spending cash to waste. Instead, move this money into your savings account.
It doesn’t have to be complicated when setting up a savings account. Many banks will allow you to set up a savings account with them in which some will offer rewards and generous interest rates. You can keep all your finances under one bank account.
5. Review your budget monthly.
When you first set out your budget, you may wish to be more lenient. It can be hard to calculate what amount you can set aside when you are not used to doing so. If you see room to tighten your budget later on, don’t be afraid to do so.
Being strict and having self-control over your spending can have incredibly rewarding results. Consider it as investing in yourself.
If you have particular months where there may be more expenses than others for occasions such as insurance, maintenance or special celebrations – be prepared. Make appropriate room in your budget when planning to accommodate these needs.
Budgeting doesn’t have to be difficult or restrictive. Instead, it should be used as a tool to help enhance your financial understanding. It will help you project what future spending you can make, whilst also making you actively aware of any wasteful expenses.
At Makinson & Co, we provide specialist services for numerous financial aspects for both personal and commercial situations. We are always happy to help and provide any advice we feel may benefit you.
Please do not hesitate to contact us today, to see how we can help.