Budget Basics
Firstly, we require complete clarity with regard to what is coming in, and what is going out, in terms of expense.
So, draw up a table with an income column, and an outcome column, adding relevant information, such as provider and other details that might be useful; we’ll end up with something like this:
For ease and minimal workload, always extrapolate each income and outgoing to a monthly amount. You may not get paid or charged the same amount, and it may not be monthly, but by averaging out you will keep things really simple and you will be far less likely to get caught out by an unexpected expense.
Now, obviously your budget will not look exactly like these examples! There will be numerous additional expenses, hopefully some more side hustles and other income sources, and you may well have a deficit like below, rather than a surplus, like above, at the end of the exercise. Fear not, we are going to vastly improve the situation through having clarity, and then formulating a plan.
I like to budget in excel as it means I can format the cells so when I update the amounts (hugely increasing utility bills for example...) it automatically re-calculates my surplus/deficit. But it’s quite simple to do it with a scrap of paper and a pen, there’s no excuse to not know where your money is going; here is an occasion when ignorance really isn’t bliss.
For absolute clarity, take the past 12 months worth of data, and check you’ve not missed any charges that occur annually, for instance, you might pay for your car tax and insurance in lump sums, so simply divide your number by 12 and add it to your budget. Once you have absolutely everything on, with an average cost for food, clothing and miscellaneous spend such as gifts and treats, you will find yourself in one of 3 scenarios:
If you find yourself in position ‘c’ i.e. with a surplus of income, then be absolutely sure that what money you have to spare is working for you. There is so much information available on this subject, check out my reading list or book a money session with me to work through this. In the meantime, it won’t hurt to run through what to do in order to find savings, as it’s always good to know you are managing your money to the very best of your ability.
So, draw up a table with an income column, and an outcome column, adding relevant information, such as provider and other details that might be useful; we’ll end up with something like this:
For ease and minimal workload, always extrapolate each income and outgoing to a monthly amount. You may not get paid or charged the same amount, and it may not be monthly, but by averaging out you will keep things really simple and you will be far less likely to get caught out by an unexpected expense.
Now, obviously your budget will not look exactly like these examples! There will be numerous additional expenses, hopefully some more side hustles and other income sources, and you may well have a deficit like below, rather than a surplus, like above, at the end of the exercise. Fear not, we are going to vastly improve the situation through having clarity, and then formulating a plan.
I like to budget in excel as it means I can format the cells so when I update the amounts (hugely increasing utility bills for example...) it automatically re-calculates my surplus/deficit. But it’s quite simple to do it with a scrap of paper and a pen, there’s no excuse to not know where your money is going; here is an occasion when ignorance really isn’t bliss.
For absolute clarity, take the past 12 months worth of data, and check you’ve not missed any charges that occur annually, for instance, you might pay for your car tax and insurance in lump sums, so simply divide your number by 12 and add it to your budget. Once you have absolutely everything on, with an average cost for food, clothing and miscellaneous spend such as gifts and treats, you will find yourself in one of 3 scenarios:
- With a deficit, meaning that what you spend is more than what you earn, and you are accruing debt.
- At break even, this means that you spend exactly the same as what you earn.
- With a surplus, which means what goes out is less than what comes in, and you are accumulating money.
If you find yourself in position ‘c’ i.e. with a surplus of income, then be absolutely sure that what money you have to spare is working for you. There is so much information available on this subject, check out my reading list or book a money session with me to work through this. In the meantime, it won’t hurt to run through what to do in order to find savings, as it’s always good to know you are managing your money to the very best of your ability.