Tuesday 30th April 2019
Ever gotten to the end of the month and wondered where all
the money from your pay check goes? Keeping a budget can help you track where
your money is going, stay on top of your bills and debts, and direct your
earnings towards your financial goals.
Budgeting might sound restrictive, but it goes beyond
scrimping and scraping – more importantly, it’s about recognising your spending
pattern, sorting out your priorities and managing your expenses to find that
sweet spot between spending and saving.
Here are a few things you should know about creating and
keeping a household budget.
How do you budget?
A budget is essentially comprised of two components: income
Income is the money that you receive from a variety of sources,
such as take-home pay from a job, benefits, returns from investments and more.
Expenses could be divided into three categories: fixed
expenditures (e.g. rents, fixed rate mortgages), variable expenditures (utility
bills, groceries, petrol), and discretionary expenditures (gym memberships,
streaming subscriptions, other recreational goods and services).
The first thing to do is to track down and keep records of
these three components in your life for around a month. There are many
different methods to do this, from the humble paper and pen to spreadsheets and
graphs. You can also find many free budgeting templates or apps on the Internet
that will pull out your weekly, monthly and annual numbers in an instant.
Once you’re done, you will be able to find out your net
income by subtracting expenses from your income. If you have a positive net
income, or a surplus, you can put the extra income into your savings account or
invest it. If you have a negative net income, or a deficit, you can take a look
at your budget to see which expenses you could reduce. Generally, discretionary
expenses should be the first to go when you’re looking to minimise your
After you get your budget in order, you can set your
financial goals for both the short and the long term, be it going on a holiday
or creating an emergency fund for rainy days. You can periodically review your
financial priorities to adjust to changes in your job or lifestyle.
Need help managing your budget with a loan on the way?
Contact our team today.