Personal Finance Tips: How to work out your budget

 

It is amazing how few people actually plan and stick to a personal budget, however if you are looking to save a little cash or you are worried about debt, then the wisest thing you can do is to work out a budget and stick to it. Read our guide on working out a budget to help you get on top of the budgeting game today!


When working out expenses it is important to be realistic. If you smoke for example, instead of promising to kick the habit right now you should take account of what you spend on cigarettes and record it. Once you have a starting point like this it is much easier to know when you have overspent and when you need to make savings.


Plan for financial emergencies


A financial emergency will creep up on the best of us at one time or another. The trick is how to cope with these and planning a financial emergency strategy is always a wise idea. You should always work out the cost of the worst case scenario and compare it to one that mitigates the damage. An example is a birthday party. Imagine you are short the balancing payment on a birthday bash you booked? If you cancel the whole thing it could end up costing you more than if you do something like approach a reputable payday loan company like Wonga for help.


Work out your income


Any budget starting point is the amount of income you have from wages, salary, trusts, rental income, maintenance, benefits or bonuses. You need to identify every single source of income you have and record it. If you are self-employed it may be a little harder to work out a budget, but a good tip is to review the last three month’s of bank statements and then take an average of what has come in over that period. This gives you a good starting point to work from if you find it hard to predict your income.


Work out your expenses


Working out your expenses means creating a comprehensive list of everything you spend money on. You can start by identifying essentials like housing costs, travel, food and utility bills. Then you can add in things that are perhaps not as essential like take-aways and entertainment costs. Once you separate these expenses you are in a better position to cut costs if your income is reduced suddenly or unexpectedly. If you have expenses that are quarterly, monthly and weekly, it helps to work out a monthly or a weekly expenses budget so it you pay 200 per quarter on electricity, you will find it beneficial to work out what this costs on a monthly basis. This way your expenses are much more manageable.


Identify areas where you can cut costs and areas where you can increase income


Once you have a full list of your expenses and income it is easy to see whether you need to be considering increasing income or decreasing what you spend on. Great ideas for increasing income include renting a room in your house out, or getting a weekend job. You can cut costs by making simple adjustments to your daily routine for example if you always eat out for lunch, you can save money by making a packed lunch and taking to to work every day.

 




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