A budget is simply a plan for your money. Though we associate budgeting with constraints and restrictions unbelievably it gives us financial freedom and peace of mind. Knowing your numbers can be a source of freedom. We need to make our money work for us and know where every euro goes. The hardest part of budgeting is getting started, once done it carries from week to week or month to month, with little adjustments.
Sometimes it can be an eye-opening experience to see your money and where it goes on paper and its highly likely that you have more money than you thought. Knowing your numbers and allocating every euro you make gives you control and all the mindless, thoughtless spending stops.
So, let us get started:
Initially write down your
- total Income per month
- expenses per month i.e… light/heating/car/mortgage/tv/insurance
- Discretionary spending i.e… Restaurants/pub/clothes/online spending
Discretionary spending can be the most difficult to ascertain, I suggest you go back over the last month to determine where the rest of your money has been going. This too is a revelation but as difficult as it may be its here you can really save your money. So, it is especially important not to skip over this section but spend the time to really see where the money was spent.
- determine your category amounts i.e., Light 300 Food 450 entertainment 100 and so on
- determine how much is left
Take your total Income and subtract your total expenses. After this calculation you should have some left, this is your available fund for savings, cashflow, paying off debt. You can also use this for unexpected expenses that occur or extra expenses that arise like birthdays, Christmas, medical bills, holidays etc.
Initially I would write all this down on paper and in time move to an excel spreadsheet for convenience.
However, you do it and I guarantee you it will make a difference, it will change your mind set on spending and saving, it will give you control over your money and how its spent, it will help give you financial freedom or at least a pathway to obtaining it.