Keeping a budget is something which is often suggested as a way of managing money more easily. However, it is hard to find an explanation of what is actually meant by budgeting and even if you have it could sound complicated. It is easy to think that it will be really difficult and so it is not a solution available to everyone. However, it only takes very basic maths and is something that most people will not only be able to calculate but will be able to apply as well. You can use a spreadsheet or computer to help you, put some paper and a pen plus a calculator if you wish, should be enough to help you to find out the information that you need. There is a selection of steps that you can carry out, which will make setting yourself a budget really simple.
Add up your earnings
The first step is to add up everything that you earn. You need to include all income whether that is any money that you get from the state, from investments, family etc. So as well as the income you get, from employment and/or self-employment you need to include all money that you have coming in. If it is the same each week or month then this can be fairly straightforward as you should be able to either remember or look back to bank statements to find out.
If you do not have a regular income, in that the money you get changes, perhaps because you do not have regular hours for your job or you are self-employed then the best that you will be able to do is to work out an average. It may be best, as you are budgeting is to consider assuming that your income will be lowest that it is ever is but hoping that it will be higher than that. It is best to look on the negative side with regards to income as then you will budget for the worst case scenario but you could be better off than you imagined if you do get paid more.
Add up your essential expenses
Then you need to calculate your expenses. You should be able to look back through your bank account statements to work out everything that you pay out for. This should include all of the utilities, contracts/subscriptions, debt repayments, rent/mortgage, taxes, insurance, transport costs, food and anything else that you pay out for regularly that is necessary for you to have. There will be many more things that you pay for as well but these will not be counted at this stage. All you want are the things that you have to pay or else you get fined or jailed and the things you need for survival as well as for work.
The reason for only including these as everything else is not a necessary purchase and therefore can be eliminated if necessary. You will have to buy certain items but there will be things that you do not have to buy.
Calculate the difference
Once you have a figure for how much income you normally get in a month and one for the necessary items that you have to pay for, you can take one from the other. You will need to take the expenses away from the income and this figure will be how much you have left to spend on everything else.
This amount will obviously vary from person to person. You may be shocked as to how much it is or how little it is. Having not done this before, it is likely to be a surprise to you either way. It is actually an interesting exercise to do and will need to be redone every time you have a significant change in income or expenditure.
Allocate your money and set the budget
Once you know how much money is left, you will need to think about how to allocate it. Some people like to have a daily budget, some like to have a weekly budget and some like something different. You need to consider how often you spend money and therefore which length of budget will be most relevant to you.
You then need to make sure that you stick to the budget. This means that you will need to be really aware of everything that you are buying and how much it costs. Consider how much of your budget you are spending and whether you are happy to spend it on this item. Remember that you will not be able to spend more money than you have. You may decide you can go over your daily budget one day as long as you even it out and spend nothing the next. This can work for some people, but you have to be careful because there is no point in setting a budget if you spend it all within a few days and have nothing left. The idea is that it should help you to spend less money in big chunks and therefore you will be able to make your money last until you get your next pay check.
It can take some time to get used to doing this, but once you get used to it, you should find it to be a good way to make sure that you manage your money. It should allow you to always have enough money to keep you going until you next get paid without spending more than you realise. It will also make you more aware of everything that you buy and think about the prices. You may start to compare prices and buy cheaper items or buy less things that you do not need. This will enable you to spend less and you could find that you may even be happy to tighten your budget so that you have extra money which you can use to repay debts or put into a savings account. It can feel really good knowing that you are in control of your money and that you can even work on saving money or paying off debt.