Who doesn’t love month-end? The moment your salary hits your account it’s a great feeling. You splurge on things you don’t normally do, like a well deserved and hard earned sushi lunch. Many do this because in the back of their minds, they unwittingly know that this is the only day of the month they’ll be able to afford doing this. Hey, the bank account is looking really healthy, right? The debit orders haven’t gone off yet, bills haven’t been paid and you feel like you have wings.
Only once those debit orders start going off, you fill up the tank and pay the utilities, suddenly there is less left than you need to get through the month. So you tighten the belt even more, sometimes choking yourself in the process, and wait until the next month-end rolls around. It doesn’t need to be like this! With some easy-to-follow tips, you can set up a monthly budget that helps you live within your means and perhaps even afford that sushi lunch without borrowing from Peter to pay Paul.
- Calculate Expenses
Your first step in setting a budget that you can keep to is to find out exactly how much you’re spending each month. Do this by checking your bank statements and receipts. Since some expenses are intermittent, such as rent and insurance, you’ll get a more accurate picture of your financial status if you calculate an average for three to six months.
Add everything up you spent in the last 12 months, then divide that by the amount of months, and this gives you an average of your monthly expenses. You need to be thorough when calculating expenses, and also factor in unexpected bills, like phone or car repairs.
- Determine Your Income
Once you’ve figured out the amount you need to stay on top of your expenses each month, you need to determine your actual income. Aside from your regular salary, achieve a more accurate picture by including any additional funds that come your way throughout the year. This could include commission, royalties or any other sources of money like interest, child support and rental income, etc.
- Start Setting Savings and Debt Payoff Goals
Before determining realistic debt payoff and savings goals, it’s necessary to determine if you have a budget overage or shortfall. You come to this conclusion by subtracting your monthly expenses from your income. If you determine you are making more than you’re spending, then good for you! This amount can then be earmarked for paying off debt, or savings.
However, if you find out you’ve been spending more than you’re making, it’s time for some tough decisions and cutting back. This should help you stop going further into debt right away. The best way to do this is to track yours pending, and record every expense for a month. Seemingly insignificant purchases like canteen lunches and coffee add up over time, so even if you save a few bucks here and there, it’ll definitely make a dent.
- Track Spending and Record Progress
The best way to stay on top of your budget is to take care in recording all your expenses and income. Having to actually sit and record every expense forces you to think twice before splurging. It is especially satisfying and totally motivating to record when you’ve met a specific savings goal.
- Be Realistic
Aim for sticking to the budget as much as possible, and you’re bound to reach your financial goals. Chances are you’ll break your budget on occasion, and it’s okay, providing that you get back on track as soon as possible, and do your best to stay on the road to achieving your financial goals.