With the cost-of-living crisis in full swing, more of us are looking for ways to make our money go further, and what better way to do this than with a budget. Knowing precisely how much you have in terms of income and outgoings, allows you to make changes where necessary and can help you to save so you can meet your financial goals.
If you’re struggling to pay your bills, uk payday loans can help in an emergency. Read on to find out more on how to create your monthly budget.
1. Start with your income
Deciding to make a budget all starts with looking at your bank account and getting to know your income and your outgoings each month. This extends further than your salary alone, and other factors should be considered, like any refunds that might be paid back into your account, any bonuses, or cash back, as well as any secondary income from side businesses.
Totaling all these factors up each month allows you to work out your net income – which is the funds you have in your account before your outgoings are taken away.
If you are paid a regular salary, you’re going to be able to get a good general idea of how much you have to play with each month, so you could make an estimation and add in any refunds or bonuses you get in that month. If you work shifts, or you work irregular hours, your income may be harder to determine – you can make your budget by estimating how much you think you’ll be paid, or how much you’re paid on average.
2. Monthly Expenses
After you’ve conquered your income, it’s time to tackle your monthly expenses. You should start with your primary expenses, bills that leave your account to pay for your mortgage or rent, any car payments or insurance, as well as energy bills and shopping. These are all essential expenses. After this, try and work out your secondary expenses, this includes products or services you spend money on, but may not need to, such as dining out and takeaways, entertainment, and clothes.
You can add up all your expenses and take them away from your income to see how much you have left to work with, as a fallback, or so you can save. If you find that what is left over isn’t as much as you’d hoped, you can identify any spending that is not essential and decide if you could make a few cutbacks.
3. Monthly Goals
Think about where you want to be financially and how you can get there. Do you have a goal within your savings? Is it long-term, or are you saving for something in the future like a home or your retirement?
Considering your goals allows you to set out a plan to get you to where you’d like to be. You can adjust your monthly budget to include setting aside a small portion into your savings – and even if you don’t have a lot of money left over after your monthly expenses, a little goes a long way – even just adding a small amount can help you achieve your financial goals.
4. Prioritize debts and savings
It is essential that when making your budget, you prioritize making repayments for any debt that you owe, as well as saving for an emergency. The sooner you pay your debts off, the better, and you’ll be able to free up some cash flow. You could also create a direct debit that leaves your account and goes into your savings each month, this way you can be consistent with the amount you’re saving, and you can watch the cash mount up without having to do anything! Having a backup of cash in case of an emergency is essential.
5. Tools to help
Budgeting is a great way of getting a handle on your finances and can help you save in the long run. There are a few tools that you can use to help you plan for the month such as:
Budgeting apps: There’s an app for everything these days, even budgeting – so you can connect your credit or debit card and keep an eye on your expenses in the palm of your hand. This makes it so much easier for you to categorize expenses and stay up to date with where your money is going, which means you can make changes easily.
Spreadsheets: If you’re skilled when it comes to spreadsheets, why not use them to clearly track your expenditure? You can customise them in whichever way suits you and use formulas to make tracking easier.
Pen and paper: Writing your budget down so you can refer to it when you need to can be helpful. You don’t need anything fancy, making notes and writing things down is the preferred method for a lot of us, it helps us to organise our thoughts and our expenses.