Many people end up in financial difficulties, not because they have lost their jobs or had unforeseen expenses, but simply because they’ve never had a proper family budget. A budget gives you a snapshot of exactly how much you get in and what you spend it on. Let’s briefly examine the principles of a successful budget.
Start off by writing down every cent you spend for a whole month. Keep a notebook at hand and write down whenever you buy something or pay an account. At the end of the month, draw up a spreadsheet or simply use a sheet of paper with different columns. Create categories for the different type of expenses, such as mortgage bond or rent, food, transport, entertainment, repairs etc.
This will already give you an excellent overview of the way you are spending your income at the moment. You’ll no doubt be shocked to realize how much money you spend on things that you don’t absolute need to buy. If you are trying to save money, these are the things you should cut down on. It’s surely nice to always have chocolates and beer in the house and go to a restaurant every second night, but if your budget doesn’t balance, you will have to make some compromises on this.
The next step you should take is therefore to critically analyze all those expenses and honestly distinguish between necessary and unnecessary expenses. Your mortgage bond repayment is no doubt a necessary expense. So is chronic medicine you have to take every day. Candies and movie tickets are not and you have to restrict those expenses to force your budget back into balance.
Then start giving attention to the figures you have marked in red. Have a look at your food bill, for example. If you’re buying a lot of pre-cooked meals, you can no doubt save money by preparing meals at home. By cutting out duplicate trips, you can undoubtedly save money on fuel.
Once you have trimmed down these expenses to reasonable levels, don’t think that’s the end of the story. You now have to make provision for things that have to be paid every few months or even yearly. Let’s say you have a yearly insurance premium of 1200 USD. Then you have to include 100 USD in your monthly budget to make sure you will have that money at the end of the 12 month period. The same goes for expenses such as having the car serviced, the house painted etc. On top of that, have a column for unexpected expenses.
A practice that works very well with this kind of expenditure is to physically transfer the money every month from your check account to a savings account. This will take away the temptation to spend it on something else. If you leave the money in your check account, it’s very hard to keep track of these funds and you could easily spend it without even realizing it.
A budget that has been well planned will take a lot of stress from your life. Suddenly there will always be money for the things that must be paid at the end of every month. And there will surprisingly also be money for entertainment, because it’s on the budget. And when the time comes for the car to be serviced, just look in your savings account – the money will be there.
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Tags: Spreadsheet, absolute need