Budgeting is boring, and it’s also sometimes a little complicated. You may be put off because you’re not good with numbers, or you could simply not want know just how bad your financial situation is. It’s incredibly easy to bury your head in the sand and convince yourself that everything is ticking along nicely, when in fact you may be relying more on credit than you realise to keep up the illusion that you’ve got more money than you actually have.
Creating a budget, even if you feel totally on top of your finances, is always a good idea. It shows you on paper exactly what your finances are doing and it can help you to take a step back and see where the holes and the potential problems are in your spending.
Recording your budget
You can do this by hand on a piece of paper or, to make it easier on yourself, you could use a computer and enter all of your numbers into a program like Excel. You’ll need to go right back to basics and start by listing all of your income. Rather than just put one number down, you’ll need to list each small income stream you have. This will help you to see where the bulk of your income comes from and it’ll be easier to calculate your income if one of these income streams changes or disappears.
You’ll need to list your salary from your job, any second salary from a second job, child benefits, tax credits and other extras such as dividends or the proceeds from any sales on eBay or similar. If you can lay out your table so that you’ve got the days of the month running along the top, and the different income sources listed down the left-hand side. When you’re due to be paid, put the amount you’re going to get in the corresponding box. This way you’ll be able to see how long you have between being paid some money, and you can plan accordingly.
Next, you’ll need to calculate your expenses. This list is likely to be a lot longer than your incomes, as it will include things like: mortgage/rent, council tax, loan or credit card payments, electric bills, gas bills, water, insurance, phone bill, TV licence, internet, subscription TV, gym membership, food, clothing, haircuts, medical costs, car payments, fuel, car insurance, car tax…the list will be different for everyone. Remember that not getting everything perfect straight away is not a problem. Give yourself a month to remember and note down all of your expenses, including miscellaneous ones (grabbing the odd chocolate bar on the way home should still be recorded!). If you have any particular dates that bills have to be paid by (via Direct Debit, for example), then you should note these amounts downin the correct box once again.
This should give you a good ‘snapshot’ of a typical month. If you total up your incomes and take your total expenses away from this number, then this can give you a good idea about where you stand. If the number you get is a negative one, then you may need to go through your expenses and make some cuts.