Creating A Budget And Sticking To It

You can maintain your finances and stay away from debt in an effective manner by creating a budget and maintaining or sticking to it. The word budget brings the thought of figures and money into your mind.

Budget is the best way to balance your expenditure and ensure you do not spend more than what is required. It is not a difficult task to create and maintain a budget.

Start the budget in a very simple way. Pick up a plain paper. Divide it into different columns. Devote one column to include details of monthly income. Besides the salary, include benefits such as child benefits and tax credits. In case of dual finances, mention the partner’s salary as well.

Be Honest:

Write down the monthly expenses in the next column. If you have not retired, then this column will be lengthy than the previous column. This is not a reason to panic. Be honest and mention all the expenses. This way, you will become aware of unwanted expenses, if any.

Make a list of key commitments as such rent service charges, house tax, council tax, and entertainment utility charges (TV). In addition, you may also mention life insurance premiums, maintenance payments and pension contributions. In case of having a vehicle, calculate the expenses that you spend on (Ministry of Transportation) MOT, vehicle insurance and maintenance services. Any loan, second mortgage, repayments also need to be mentioned. Now, calculate the total expenditure. This will give you the total cost of your important expenditures.

The next column will consist of your everyday spending. If you have kids, then mention the costs of childcare and toys and cloth expenses. Mention a real estimate of toiletries, monthly food, parking expenses, petrol costs and public transport. Mention the expenses over leisure such as newspaper, books, DVD purchase, gym membership, magazine bills and rentals. Do not forget to mention your expenses spent on visits to health clinics, and your hairdresser.

Also, mention detail expenses of your bar bills that include lunchtime food purchased during working hours and trips. If you are a chain smoker, mention the cigarette expenses too. Write down the food expenses of the pets, if any. People who are passionate about electrical gadgets, retail therapy and electronic gadgets will spend lot of money on them. Mention these expenses too. Finally, calculate the total costs.

Big Picture:

Now, add all the above sub totals. This will provide you with the grand total and subtract this from your total income. This will give you an idea, if your spending is more than the income and if yes, then you will get to know how much it is. Set aside certain amount for emergency purposes.

One good practice is to review the standing orders and direct debits. Cancel the gym membership, magazine subscriptions, phone contracts you do not use. Get a list of standing orders and direct debit and review them on a regular basis.

Creating budget is not enough, as you have to maintain and stick to it, to summarize unwanted expenses and keep the finances intact.

• How many people make more than $250,000 per year? [The following is an article from Kosmo at The Soap...
• Weekend Personal Finance Links I'm living in a world of wonder where the Patriots...
• The Benefits of Leveraging Debt to Create Multiple Income Streams Let’s face it, debt has managed to earn itself a...

Tags: Accounts, Bank, Banking, Current Account, Debt, Money Management, Savings, UK Credit Cards