Most people dread the month of January; not only because it takes a while to get out of the holiday slump, it also feels like the month is 42 days long – and your wallet keeps on getting thinner with each passing day. So, to prepare for not only the two months of January, but every month, we’ve compiled a step-by-step guideline to help you create (and stick to) a budget.
1. Set financial goals
Define short-term and long-term financial objectives. Ask yourself “what do we really want or need that we have to save up for?” This could vary from saving for a vacation to building an emergency fund.
2. Calculate your net income
Determine your monthly net income. Be sure to subtract taxes and deductions, like debit orders, to give you the actual budgeting amount that you’ll be working with.
3. List your monthly expenses
Categorise expenses into fixed and variable, including debts to understand your spending patterns. These lists are extremely helpful, as it serves as a visual aid so you can actually see what your money is going towards.
4. Create budget categories
Break down expenses into specific categories like housing, groceries and savings and allocate income to each category. Again, having a ‘budget list’ for this step is very helpful.
5. Set realistic limits
Establish practical spending limits for each category based on income and financial goals. Really try sticking to the allocated amounts; if it’s less than the budgeted amount – even better!
6. Emergency fund allocation
Include a category for an emergency fund. This fund can serve as a safety net for various reasons, like aiming to save 3 to 6 months' worth of living expenses or for any unforeseen expenses that might occur.
7. Plan for debt repayment
Allocate a portion of your budget to repay debts, prioritizing high-interest ones, like credit cards or personal loans.
8. Monitor and adjust
Regularly track spending against the budget, adjusting as needed for changing circumstances. For instance, if you spent a little less on groceries this month, you might be able to allocate an additional amount to the ‘personal’ category of your budget.
9. Save for future goals
Allocate a portion for long-term goals like retirement or a down payment on a house, ensuring consistent saving.
10. Use budgeting tools
Leverage technology and apps to streamline the budgeting process. Whether you prefer an Excel Spreadsheet, the notepad on your phone or an app like 22Seven, be sure to have at least one tool to assist you with your budgeting.
11. Review monthly
Analyse actual spending against the budget each month, making adjustments for the following month. With increasing living costs, your budget is sure to vary from month to month. Be sure to review and adjust it accordingly.
Remember, a budget is a flexible tool, and adjustments are key as circumstances change. Stay adaptable for successful budgeting.
If you would like professional help in setting up a budget or speak with someone about personal finances, click on the image below which will redirect you to The Go-To Guy’s website to find a financial service provider:
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