28 May 2015

Lifestyle: How To Create A Budget


I was inspired by the lovely Leanne over at Organising the Four of Us when she was talking about budgeting to finally sit down and get this budget thing happening.

We've always had a rough budget, but when the kids came along and we were on one income the savings disappeared pretty quickly.

It's taken me a lot of courage to sit down and work on our budget recently, but I am so glad that I did. Now I can see where our money is going, what to expect in the upcoming months and where we could possibly be able to make cuts in order to save more.

If you haven't created a budget for yourself before or in a while, here are a few steps to take to get started.

1. COLLECT ALL THE INFORMATION REQUIRED

Before you can effectively work out a budget, you need to sit down with a pen and paper and your bank statements and or bills folder and go through everything. When it comes to income and expenses every household is different this is why it's so important to go through your statements.
The below list covers what most households will need to cover in their budget, but as I mentioned it all varies from person to person. You also need to write down the exact amounts to get a clear picture. $1 on every expense can make a huge difference at the end of the year.



2. DO I REALLY NEED IT? 

Once you've written all your expenses up, look over each one and ask yourself the question DO I REALLY NEED IT? Can you live without foxtel? Could you swap it for Netflix instead? Do you really need that very expensive cheese on a weekly basis that costs 1/3 of your weekly grocery bill, or could you give it up altogether or indulge in it on a monthly basis instead? Call your internet provider and find out how much data you really use on a monthly basis. You'll be surprised to find that you're spending a lot less than what's on your plan. I found looking over our expenses, I could also cut back on groceries, personal spending, clothing and makeup (um what?) and insurances. I also combined our gas and electricity with one provider and am getting discounts for doing so.

3. WORK OUT THE FREQUENCY 

You need to work out the frequency of your income, bills and other expenses. This can make a huge difference. If you pay your home or car insurance on a monthly basis, chances are that you're paying more than if you paid it yearly. Same goes for your mortgage, other debt, insurances and utility bills. Once you have the breakdown of this, you can work out how much money you need to put aside for each expense depending on your pay period.

Example: Our home insurance is due in 3 months time. Because I haven't had a budget I haven't put any money aside for it. I've worked out when that bill is due and have worked out how many pays there are until that is due. I have now worked out that I need to put aside X amount away over the next 12 weeks in order to have the money for that bill. Same goes for all the other big bills especially the registration, insurances, tax bills. Once that bill has come and gone, I will work out the expense based on this years premium and work out how much I need to put aside over the next 52 weeks in order to have the money in the account for that bill. 



4. SET UP SEPARATE BANK ACCOUNTS

I'm not talking about setting up a bank account for every expense, but if you can set up an account where all the expense money goes into it will make life easier and you'll know how much you have sitting in your account for bills. Some providers will also let you prepay the bills. I'm not a fan of doing that because I would much rather have the money sitting in my account collecting interest (if you decide to put it in a mortgage offset or high interest account).

These are the basics to start off with when it comes to your budget. 

I will be doing another post on what you can do to make your dollar work harder for you soon, so stay tuned. 

I would love to hear from you! How do you budget? Do you have any advice for myself and my lovely readers? 


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