7 steps to creating a budget

Why You Need A Household Budget

It doesn’t matter whether you are earning a living in a well paid job, working for yourself or living on benefits, everybody needs to learn the steps to creating a budget. However you are getting your income you want to make sure that you are spending it wisely. The best way to do this is by setting a budget and sticking to it.

Keeping a household journal is a good way to see at a glance what is coming in, what’s going out and on what it is being spent. It will also show if there’s anything left at the end of the month to put into savings.

If you fail to plan then you plan to fail.

If you do not track what you are spending and keep a record of your expenses and your income then it can lead to real problems. This is particularly true these days when the use of actual cash is fast disappearing. Back in the old days people were often paid in cash and certainly most would draw money out of a bank and spend the money they had available. With the increased use of cards and online shopping it is really easy to not keep track of the money you are spending. You may not notice how much you are spending until you get to the end of the month and find you are overdrawn at the bank. You may be left wondering where it all went. If you keep a written budget, you will know.


Having a budget highlights what we are spending out hard earned money on and gives us more control over where we want to spend it. It allows you to set priorities. Perhaps you are saving for a holiday or wedding. You may want to cut down your spending on luxuries like takeaway meals and trips to the movies or theatre. Having a record of these expenses makes this easier. Perhaps you accept the importance of creating a budget but don’t know how.


How Do You Make A Budget

A budget simply tracks your money. You record where your income comes from each month and then record everything you spend it on. It’s important to track every outgoing. This is everything from regular monthly bills like mortgage or rent, utility bills, , car payments, insurance, college fees etc. The difference between your income and the sum of these essentials is your discretional income. This is the money you get to choose what to spend it on.


Having it all laid out in black and white helps you identify things you’re wasting your money on. Perhaps there is a subscription that you took out in the past that you no longer use. Things like a gym membership or magazine subscription. Perhaps you have a large bill for a phone or an entertainment package. Seeing the expense in black and white can encourage you to shop around for a cheaper deal if you can’t get rid of it completely.


A Budget Can Help You Save

Saving money without a budget is hard. How often do you find that there is more month left at the end of your money than vice versa. You may have good intentions at the beginning of the month, but somehow there isn’t anything left at the end.

A budget gives you a chance to be a bit more proactive. Set aside some money for savings at the beginning of the month, even if it’s just $20. Allocate it in the budget as a regular expense, just like you do with your other bills. Set up an automatic transfer from your bank account to a separate savings account.

Aside from saving for planned events like holidays, having some money set aside in a savings account will act as a safety net for unexpected expense. You never know when your car may need work, something breaks in your home or you become unwell and can’t work and have medical bills to pay.

Perhaps you are thinking at this point that you don’t have even a small sum to put away. In that case you need to do some serious budgeting on what you are currently spending.


Control Your Grocery Spending

Aside from your mortgage, your biggest monthly expense, especially if you have a family, is probably groceries. With some of your outgoings like your mortgage, your car payment and utilities you may not have any control over them on a month to month basis. When it comes to groceries though you have some control over how much you spend. Creating a budget for your everyday meals is important. 


Create A Grocery Budget

First you need to know how much you’re spending on groceries. Keep a record for a few weeks. Work out what you have been spending on average per week. Take that figure and reduce it by $20. set that as your budget for this month. Next month reduce it by the same amount and see if you can manage. Keep going like this and see how low you can go. The following ideas will help.


Find Some Cheap Meals To Enjoy

Think of a few inexpensive dishes your family enjoys. Vegetarian meals are usually cheaper than meat based food. Even if you are living with a confirmed carnivore have one or two meals each week that are plant based. Start with Meatless Monday and work up from there.

Cut out waste. It is shocking the amount of food that gets thrown out in many households. Cook meals where leftovers can be eaten the following day or frozen.

Batch cooking and freezing some meals will save you money on gas or electric as well as freeing up some quality time.


Cut Out The Extras

Make a list before you head to the store and stick to it. All those little extras that take your fancy as you walk around or the chocolate you grabbed while queuing at the checkout start to add up. Stick to your list and you’ll cut your grocery bill by quite a bit each week. It’s amazing how all those little extras add up. Those extras are quite often the unhealthy fattening things so you may even end up healthier also.


Know What Things Cost

Everyone loves a bargain? But do you actually know one when you see one? Stores are really good at pricing items up as special offers but are they? If you keep a note of the items you buy regularly then you will be able to tell if they are worth buying. Sometimes the two for one offers on a different brand are not any cheaper than buying your regular brand.


Creating a Budget can Relieve Stress

Living under constant financial pressure can be very stressful. Give these tips a try and you should start to see big savings on a weekly basis. Then you can spend anything you save on what you choose. Of course if you have debts on your credit cards then the responsible thing to do would be to pay those off before you spend the extra money on treats like a holiday. I would say though, that if you allow yourself small treats, that will give you the encouragement to keep going with creating a budget and sticking to it.

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