Now I don’t know about you but I think we’e all been guilty of getting to the end of the month and wondering where our money went? For me, it was usually hanging in my wardrobe or spent eating out a couple of times a week. But over the years I’ve realised that one of the best ways I can control my spending, is with a budget. Now I know what you’re thinking, and budgets don’t have to be boring. They’re a great way of seeing where your money is spent, what money you can save and how you can make your financial goals happen. But if you’re not sure where to begin, let me share with you how to make a budget.
STEP ONE – SHOW ME THE MONEY
Now the very first thing you’re going to need to do is to get an oversight of your finances. So you’ll need access to your current accounts, your savings accounts and your credit card accounts to see the statements. It also helps to have a a list of all direct debits and how much they’re for. This is to help you get an understanding of everything you need to pay for every month.
STEP TWO – TRACK YOUR SPENDING
Now you can either do this on a spreadsheet (I have the one I use below). Or you can do this on a money management app like Emma. You can sign up to Emma here. This step helps you to track your spending. As when you can track your spending you can work out where you can cut back if you’re looking to make savings. While you probably can’t cut back on your fixed expenses, like your mortgage. You might be able to cut back on your variable expenses, like your monthly food bill.
STEP THREE – WHAT ARE YOUR FINANCIAL GOALS
A big reason to start a budget is to look at ways you can make your financial goals happen. So what are yours? Is it to build a savings pot that will go towards your first home? Or a second home? Is it to have the trip of a lifetime? As well as looking at your long-term financial goals, don’t forget the short-term ones too. For me, the short term goals are a new bag and a holiday. The long-term goal is a second property.
STEP FOUR – ANY WRIGGLE ROOM?
Now you’ve tracked your spending you might find that there are areas where you could make some big savings by making small tweaks. For instance, not going out to eat twice a month at £50 a time could result in an extra £1,200 in your savings pot at the end of the year! And don’t be put off by making only a small saving. It’s amazing how a small saving can add up to a lot of extra cash in the bank.
STEP FIVE – KEEP CHECKING IN
You’ll see from my how I budget m £50,000 a year salary post that I check in on my budget every single month! That’s because it’s important to me that I keep an eye on my money to ensure my spending doesn’t get out of control and that I can hit my financial goals.
So that’s how to start a budget in five simple steps. Let me know in the comments below if you have a budget and whether this post has inspired you to start one.