What to think about when setting up a budget
What pops into your mind when you think about budgeting? For many people, the knee-jerk reaction is “immediately no.”
But, getting a handle on your money is the first step towards achieving your financial goals! Whether that’s buying a house, going on the fancy 5 star holiday of your dreams or running away to volunteer at a sloth sanctuary.
We can let you in on a little secret though…it doesn’t have to be hard if you follow a few core principles.
- It sounds so simple, but you need to know what money you have coming in and going out of your account each month.
Keeping track of what’s coming in might be easy, but do a spending review so you can see where your money is really going. Look back over 3 months worth of bank accounts and credit card statements. This will give you a good idea of your general spending.
Then break down your fixed spending (for example bills or your mortgage) and your variable spending (this will be the non-essential items). Doing this will show you where you could be making some changes.
- Then decide on the goals that you want to work towards. Knowing your ‘why’ can be a big motivator in saving money. For example, it’s a lot more exciting to feel like you’re saving towards a beach holiday in Ibiza with your friends to celebrate your 30th than just ‘Savings.’
- Think through how you’re going to budget. This needs to be a plan that you can stick to and one that feels straightforward. You might have to try a few different methods to find the one that’s just right!
- if you’re a spreadsheet fan then use something like Excel to help you
- if spreadsheets make your head spin, use an app!
- Lastly, review and adjust on a regular basis to make sure that you stay on track. You don’t want your budget to feel too restrictive or you’ll feel like you’re not enjoying your life and you’ll want to give up. So be sure to make room in your budget for the little luxuries that bring you joy. This part of your budget is your ‘fun budget,’ so have fun with it!