Everybody needs a personal budget if they want to have total control over their finances. If you never think about how much money you spend, you will find that you never have spare cash. That means that you will waste loads of money on frivolous things for no good reason. If you don’t learn to respect your finances, you won’t have any finances to respect. You should ensure that you do everything it takes to save and look after your cash. First, let’s start with setting a viable budget.
Step one – Understand your income
Many people don’t think about how much they make. If you have a salaried contract, you will always make the same amount every month. If you work shifts, though, your income could fluctuate according to how much work you do each month. You should make sure that you understand how much your average paycheck is. Look back at the last six months and take an average. That amount is the money you need to use. You should ensure that you save some money each month so that when you have less than you expect, you can cover your essential costs.
Step two – Consider your debts
If you have debts that you need to repay, you need to factor them into your budget as well. Many people ignore their debt problems because they find them hard to face. You might want to cover all your fees with one helpful loan. Some loans allow you to borrow a lump sum to cover all your debts. That way you will only owe money to one company, rather than trying to juggle all your expenses. If you have serious debt problems, you might need to get some advice from a financial expert before you do anything.
Step three – List your outgoings
How much do you spend on bills and expenses every month? You need a round figure before you can move forward with your budget. Add every single expense together and work out what your total is. You should consider bills that tend to fluctuate as well, such as your phone bill or how much you spend on fuel. It might take some time to do this step, but it is vital if you want to deal with your personal finances.
Step four – Check out the difference
You should have two sums now. The first sum is how much you make each month and the second sum is how much you spend each month. You should subtract the second amount from the first. When you have done so, you will know how much disposable income you have. It might surprise you to learn how much extra cash you have on a monthly basis. Most people have no idea how much excess money they have because they don’t think about it when they spend it.
Step five – Underestimate your spending
The final, and most important step, is to set yourself a budget. You need to underestimate how much you think you need to spend. On average, people tend to spend around 30% more than they need to every month. That means that you can always afford to cut back on your finances. Set yourself a budget that is a little less than you expect you will need to spend. That in itself is a challenge. Make sure that you plan for socializing and having fun. If you try to stop yourself having a social life, you will set yourself up for failure. Now that you have a budget to stick to, you can start to improve your finances one day at a time.