How to create a budget
Taking the time and effort to sit down and concentrate on creating a budget usually sounds like the most demanding and unexciting thing. No matter how it is argued creating and sticking to a budget will eventually help keep an individual financially healthy. It is important to note that the more accurate information is forthcoming the better and more realistic the budget planning exercise will be
How To Make It
Withholding information or presenting distorted and incorrect information will not benefit in any way and will only end up frustrating all parties when the said budget does not work.
The reason why some folk are dishonest when it comes to budgeting is because they are unwilling to give up certain bad habits that may be the root cause of their financial difficulties.
A person who is addicted to cigarettes, weed, alcohol, or the pokies will be unwilling to give up their so-called pleasures,
The following are some tips on how to go about creating a budget: Compiling all financial statements available for close scrutiny. This should include bank statements, investment accounts, utility bills and any information of sources of income and expense
The idea behind this exercise is to be able to create an average monthly spread sheet so the more detailed the information the better.
Keeping an up-to-date version of all sources of income is the next step to be taken. This may vary for those in the self employment sector or for those in business. However for all types of income taking into account the monthly total income amount is what is needed.
Next there should be a very detailed list of monthly expenses created. Every detail should be included no matter how small or seemingly insignificant it maybe.
The item included should be the likes of mortgage payments, car payments, auto insurance payments, groceries, utilities,
entertainment, dry cleaning and laundry expenses, auto insurance, retirement, college allocations, saving and essentially anything and everything that the individual spends on.
Total both the income and expenses based on monthly calculations and then make the adjustments where necessary, especially if the expenses are more than the income. Make cut back or cut out wherever possible.
Changes have to be made in order to achieve a breakthrough in any area of your life and finances are no different.
Doing It Right
The following are some practical suggestions anyone can try: Keeping the budgeting exercise as simple as possible is one sure way to encourage enthusiastic participation.
Don’t categorize too much but remember to still maintain some semblance of accuracy. Having 2 – 5 categories would be ideal for working out a good budget easily.
Be descriptive in categorizing everything accurately. Avoid using terms such as miscellaneous and others as this would tempt the individual to justify random items that are more frivolous spending that wise spending.
This can also contribute to the scenario of not having adequate knowledge on how and why such expenses were needed to be incurred.
Tailor the budget to adequately fit the needs of the parties concerned. Using example from others is a good idea but copying without proper thought or consideration would render the so called tailored budget useless.
Have a specified amount for personal needs and sudden expenses clearly outlined and do not under any circumstances waiver from it. Also there is no need to always spend this amount as it can be
accumulated and kept aside for possible indulgence sometime later.
Make provisions for major expenditures that would be necessary during the course of the year. Examples of which might include cost of major car repairs, replacing of major household items, cost incurred for major house upkeep exercises and other expenses that would be considered out of the norm yet necessary and costly.
Spending
The following are some tips on how to effectively combat this and turn the situation around:
Be aware of how much is being spent at any given moment. People often don’t keep track of their spending habits until they are hit with the bill at the end of the month. These especially so when credit cards are involved.
Avoid the impulse spending lifestyle. Most impulse buying sprees are done on a whim and without actually thinking it through is terms of if the particular item is really needed or not.
In most cases the items are either used for a short period of time or not at all. Try waiting a day or two before actually committing to the purchase, by which time the individual would have had the time to reconsider the necessity of the purchase.
Don’t spend time in places where the urge to spend is dominant. Some people go to shopping malls when they are bored thus the uncontrollable urge to spend becomes more dominant.
Have clear objectives when going out shopping. Try writing a list of things that are needed before actually stepping out.
This will help to keep the focus away from frivolous spending and more on the essentials needed.
Consider the purchases that are currently being made and if they are being made simply out of habit.
Most people don’t realize just how much they buy out of habit and this could one of the contributing factors to the overspending characteristic.
Set little actions which can become good habits if repeated often enough.
Balancing the books is one thing; it is another to invest that money, but there are options for those who have some money saved and one of these is sharesies which you can join then drip feed money into the sharemarket. You can join here at;
https://sharesies.nz/r/377DFM
