One of the biggest mistakes any person or family makes it not having a budget. Trying to wing it every month just doesn’t’ work. If you find yourself living paycheck to paycheck, making some adjustments to your budget can help free up a little cash, so you can start saving or paying off debt.
Budgets can seem dull, boring or even intimidating, but once you get the hang of it you can snap your budget together in just a few minutes. Simple Living Australia has provided a few tips on creating a simple yet effective budget:
You don’t need fancy software
If you don’t have a lot of money, you don’t have cash to spend on fancy budget software. An excel spreadsheet or even a notebook and pencil, work just fine. Remember to make at least 12 copies of the budget sheet before you work on it so you can grab a blank one the next month, or simply save a blank version to your computer.
Your budget form should include two columns for each category: budgeted and actual. At the beginning of the month you can put in the amount you plan to spend in a certain area. At the end of the money, add up you receipts etc. and put the total you really did spend. You’ll start getting better at delegating money to different categories after a few months of watching where you need more money and where you can cut back.
When you make your budget sheet, every dollar should have a place to go. Make your budget sheet as specific as possible. Categories you’ll likely need to include are:
- Utilities (gas, water, electric)
- Car payment
- Car insurance
- Gas for the car
- Life insurance
- Health Insurance
- Debt payments (list each credit card/loan and how much, separately)
- School fees
- Housing Goods (cleaner, shampoo etc.)
While you probably don’t buy clothing every month, it’s a good idea to put money aside each month for those expenses you have the cash to buy clothing when you need it. A simple way to make this work is to use envelopes and put your cash into labeled envelopes (specifically for longer-term expenses).
Make sure to include how much income you are expecting so you can create an accurate budget. You can add extra categories if needed.
Know your limits
If you need a little help creating a well-rounded budget, here are a few things to consider about how you divide your cash up.
Try the 50-20-30 rule. This rule says that no more than 50 percent of your budget should be spent on fixed payments (rent, utilities mortgage etc.). Fixed payments are bills that you’ve committed to pay on monthly terms.
Twenty percent of your income should go towards investing or saving towards a financial goal. So consider contributing to a retirement fund or putting that cash aside into an emergency savings account. This may also include paying off debt.
The last 30 percent is for flexible spending. Flexible spending is for expenses like groceries, clothing and entertainment. How much you spend can change easily. These are good places to cut back when you need to tighten your budget as well.
Creating a budget will take a little time, but once you’ve figured it out, you won’t even have to think about it. You’ll just plug in numbers and watch your savings grow.