It’s easy to think of budgeting as a chore. Instead, think of it as a way of bringing some control into to your life.
How many times have you come to the end of the month and realized that you’ve spent too much?
It is easy to let yourself go when you get paid each month —especially if you’re not 100% on top of how much you’ll need to cover all your essential expenses.
And then, after the spending spree, the guilt sets in, and the countdown to your next payday begins. Ouch.
Ready to break the cycle and to get some control back? You need a budget.
The beauty of budgeting it that it empowers you to keep track of outgoings, cut non-essential costs and, hopefully, to build some savings each month.
Don’t think of it as a chore. Think of it as a way of bringing some control into to your life, where you know exactly how much you have, how much you need, and how much you have left over to spend on living life, without the guilt or sleepless nights.
Putting it together is pretty straightforward. Grab a pen and a calculator (or a spreadsheet, if that’s you’re really keen.
- Start by getting a clear idea of your income. If your salary is your sole source of income, this step is easy. Otherwise, add it all up. If you are self-employed or your income fluctuates, trawl through last year’s bank statements to get an idea of where you were a year ago. With this step, it’s always better to be safe than to be overconfident, so if you’re less-than-certain about something coming in, it’s best to leave it out.
- Next, get out those bank statements and break down your current monthly expenses. The more detail the better – include it all: rent, utility bills, food, transport, clothes, morning coffees, cheeky takeaways, TV subscriptions and mobile contracts.
Right! That’s the basics sorted. Subtract your expenses from your income. Got something left over? Good. In minus figures? Chances are, you’re spending too much.
The art of budgeting is about adjusting your spending until it balances with your income. Here are some of the ways to do it:
Cut unnecessary expenses
These can creep up on you and take a surprisingly large chunk of your monthly budget. Nothing good on Netflix at the moment? Pause your subscription until there is.
Throwing food away? Change how you shop. The key here isn’t to cut absolutely everything non-essential. Instead, it’s your opportunity to make your money work harder for you. Work out the things you actually value, so you can stop spending money on things you don’t.
Get a (financial) umbrella
Come up with a figure of how much you need can afford to put aside for a rainy day. Washing machine sounding a bit iffy? Car MOT a bit touch and go? School trip for the kids on the horizon? The more you can afford to put aside for the unexpected, the more you’ll be ready for anything. Think of it as an investment in a good nights’ sleep.
Pay attention to debts
Card and loan repayments cost you money and don’t add much to your quality of life. But they’re not optional. It therefore usually makes sense to prioritise paying your debts off as much as you can, as soon as you can, so you can keep more of your money. Watch the credit card, and always make more than the minimum payment.
If you’re worried about getting into the debt trap, but still want the flexibility of a card, check out our new Commodo Loan Card, which launches soon.
Financial experts can sometimes make it sound complicated, but the reality is pretty simple. It’s about making your income and expenses balance, while ensuring there’s enough left over to cover emergencies and to build for the future. Make a plan, stick to it, and rest easy.