Do you realize how many times have you told yourself that next payday I will make sure to budget my finances in order to save up for a rainy day? More often than not, what you end up doing is list down the things that needs to be paid, and then payday comes without you having to save any money left and there are those rare occasions that you don’t even have enough on your hands because of an unforeseen expense.
Creating a budget for your finances doesn’t mean cutting back on spending on things that you enjoy in life. Creating a budget for your finances means understanding just how much you have, knowing where it should go, and wisely allocating those funds. Creating a good budget can keep you on track financially and can help you identify cash flow problems that you can free up and allocate for something else.
Sitting down with your spouse and writing down these details will help you both devise a plan on how to effectively manage your funds. Once in black and white, people are often surprised at how much money they have left after all the expenses have been paid off. This is excess money that they could have saved or invested every month.
Below are some guidelines that can help you create a good budget for your finances:
- Allocate. First identify how much income you and your spouse make in a month. Also include other informal sources of income like side jobs, etc., that add to the family’s total available income per month.
Make a list of all the expenses that you incur every month. Begin by putting down an estimate of how much you are willing to spend on each category, after which list down what you actually spend on each. Once you see the difference between the two, you can adjust accordingly in order to reach your desired budget for each expense. Keeping expenditures close to the figure you have targeted will be hard at first, but in the next few months, you will see that having a target in mind will not be such a daunting task. There are budgeting worksheets that you can download online that already lists the common household expenses to help guide you through this step.
- Save. Deduct the total amount of expenses from your family’s total income. Hopefully, there is a surplus of funds. Once you arrive at this amount discuss with your spouse a figure within this amount that you are comfortable with to save and put away on either an investment or bank savings. Commit to setting aside this amount every month and consider this as an expense that has to be paid out. Waiting for any excess money after all the expenses has been paid out is not an effective way of saving money. Regarding it as an expense that needs to be addressed every month ensures that you are able to save up.
- Monitor. It doesn’t end with making a list of the funds that you have and how it is allocated. Remember to keep track of your expenses, keeping in mind the amount that you are trying to target for the expenditure.