A budget is also a way to help you to achieve some of your big dreams like purchasing a home for the family, a caravan for the holidays or anything else that requires a significant cash investment.
Your budget should include the following:
- Saving targets
One of the first items to address in your budget is your income. This should include your pay check and any other income you have.
List your current expenses
Listing your current expenses. This may be hard for many people, it is important to be honest with yourself in order to create a realistic budget.
If you don’t know how much you spend with each item you may have to start a log of your expenses. Once you know what and how much they are then you can list them in your budget.
Determine how much you should be spending
For every item in your expenses list create a column listing how much you should be spending. This is key in order to determine your savings potential and savings goal.
If you spend $400 every week in groceries there may be a potential to reduce your weekly grocery shopping to $300. Repeat this exercise for every item in your list.
It is important however to be realistic. A common mistake when budgeting is to be too aggressive to help you to save money. This is a trap, I recommend that you start being very conservative with your figures and be more aggressive once you know you can achieve your savings
It is very frustrating to setup a budget that cannot be achieved in the first place.
It is important to list your debts and debt payments you have to make. You may even create a sub heading for your debts and keep track of your progress.
Don’t forget any expense related items, make sure all is included and that you can achieve the targets you set.
Establish the budget and stick to it
You now have a budget. You know how much income you have and much you can spend with every expenditure item. Stick to your budget.
A budget is not a slavery, you control your budget, if ti is not working change it until you are happy with it.
You will find that if you follow your budget you will have more money to spend and you will achieve your savings goal faster.