The benefits of budgeting

Creating a personal budget helps improve your financial situation as well as helping you save for the future. Here’s a guide on how to create your personal budget as well as things to consider whilst doing so.

Understand your income

Think about your monthly income and whether it’s due to change any time soon. Knowing exactly (or near enough) what you expect to have coming into your bank each month will help you budget better and understand how long you need to make that money last until your next payment.

List all your monthly expenses

Think about what you spend money on each month. There’ll be the normal spending such as utility bills, petrol, rent or mortgage repayments and groceries, but think about what else you do typically within the month.

Do you go out for brunch with your parents? Does your child take swimming lessons? Do you have to take your dog to the groomers?

These are all monthly costs that people tend to forget about when they are budgeting and then they become shocked at the end of the month when their calculations are far less than they anticipated. Try creating a budgeting spreadsheet so that you can keep a close eye on reoccurring payments that happen each month.

Put some money aside for the month

If, after you’ve paid all of your bills and outgoings, you have money left over – congratulations!

You can take this money and put it to one side just in case you have any unexpected payments to make. You never know when you may need a new set of tyres!

Having this money to one side will stop you from dipping into your savings and help you out in times of need.

Split the rest between savings and spending money

Whether you’re saving up to buy your first house, first car, or are just looking to put money to one side for a rainy day, you’ll want to split your money first.

Decide how much of your money you wish to put into your savings each month and try to stick with this figure so that you reach your goals quicker. If you have a slightly better month where you have more money coming in, great, you can add to your savings. But try not to overshoot your savings pot each month and leave yourself short so that you can’t enjoy the days ahead.

Everyone needs a treat from time to time, so remember to keep some cash to one side to spend at your leisure. Try and stick to this figure so that you don’t go dipping into those hard-earned savings.