Learning to Budget and starting a budget can be a bit of a minefield. Especially if you have never done a budget before.
What kind of things would you need to take into consideration for your budget?
When creating a budget, consider the following key elements to help you draft a secure financial plan that will help you know exactly where your money is going and what you have left.
Income
Identify all your sources of income, including salaries, bonuses, freelance work, or any other ways in which money comes in to you. Make sure that it is realistic and it actually reflects your take home pay.
Fixed Expenses
List essential fixed expenses that remain constant each month, such as rent or mortgage payments, utilities, insurance, loan repayments and subscription services. So you will probably have to dig out your bank statements to help you. In Fact, I recommend you do this using your bank statement. You can also highlight here anything that you don’t need anymore.
Variable Expenses
Variable expenses are those that vary month on month, so can make it a little tricky but not impossible. It includes food shopping, travel (bus, train, fuel), social life, and other discretionary spending. Be mindful of your spending habits and set reasonable limits for variable expenses.
Savings and Investments
Now this is a must if you want to get better at budgeting and saving Allocate a portion of your income to savings. This can include emergency funds, retirement accounts, and other savings goals. I have a few saving pots in my accounts which I pay in to each month. Paying yourself first ensures that saving is a consistent part of your financial plan. Also make note of any of your investments that you may have and also how they are working for you.
Debt Repayment
If you have outstanding debts, such as credit card balances or loans, factor in monthly payments for these. Although it is never nice to have to look at debt, it is very important when it comes to budgeting and you should factor these in as an outgoing.
Financial Goals
Define short-term and long-term financial goals, such as buying a home, starting a business, or saving for education or whatever it may be that you want to save for. Allocate funds specifically toward these goals to track progress and stay motivated. Personally, I have a fund pot to help us become mortgage free and for procedures that I want to have for my own confidence.
Emergency Fund
Make an emergency fund pot a priority when it comes to budgeting. It’s going to be the pot that gives you a safety net and peace of mind for when you get unexpected bills come through, which we all know happens.
Taxes
This one is a bit boring. I mean, do we really have to pay taxes!! In reality, if you are earning enough to have to pay taxes, then well done!! I always have a rule where each month I set aside 25% of my income for taxes. It seems a lot but when it comes to the end of the tax year and I do my self assessment, I have the money there to pay any tax bill and can start afresh. Plus, if it turns out I have saved too much then that’s a bonus.
Insurance
This will come within your fixed expenses. Car insurance, health insurance, life insurance, home insurance and any other insurances you may have, goes into that category.
Allow for flexibility in your budget to account for unexpected expenses or changes in your financial situation. Having a plan for these situations will mean your budgeting journey will not be derailed.
By taking on board even just a few of these when you get started with budgeting will help you get on your way to the financial stability and ease that you desire.
Feel free to join my Facebook Community, The Money Saving Mum Community and head over to my website to arrange your money saving bill health check and grab your budget planner www.themoneysavingmum.uk
