Budgeting help
Keeping one step ahead of your finances is all about budgeting: knowing what you can afford to spend, and ensuring you have enough to cover your bills and other regular expenditure, will help you manage your money more efficiently.
Easy budgeting
The easiest way to start your budget is by looking at your last few bank statements. Tot up all your essential spending: rent/mortgage, utility bills, council tax, groceries and debt repayment and deduct this figure from your monthly income.
Keep in mind that your seasonal expenses will be different, your heating bill, for example will differ from winter to summer, but this isn't an excuse to overspend in the summer.
Once you have deducted your essential expenses, the sum you have left over is for your discretionary everyday spending, such as going out, travelling to work, petrol, etc and also includes your occasional spending for clothes, holidays and presents, etc.
Sticking to this type of budgeting can help you understand exactly what you can afford to spend on a monthly basis, rather than living out of your means and building up debts. However, while this may be a simple way to budget, it only outlines what you are spending, rather than what you should be spending. With this type of budget, it's also difficult to plan for a large, one-off expense, such as a holiday.
Comprehensive budgeting
If you want to take a more disciplined approach to budgeting, it's time to create a comprehensive budget. Start in the same way as before, take a look at your bank statements and tot up your essential outgoings. Make another list of how much you spend, on your everyday expenses and 'luxuries', such as lunch, clothes, going out, mobile phone bill, gym membership, magazines/newspapers, etc and put an individual figure against each category.
Compare this figure to your income and see where you can start making some savings. There are loads of ways to save money.
This method of budgeting will take longer initially, but it will be easier to keep track of your spending and know exactly what you can afford over the course of the year.
Troubleshooting
What to do if your income is less than your spending
Get help to spend less; look for services to cancel and cut out any unnecessary spending.
What to do if you have money to spare
Start saving - aim to build up around three months' worth of salary as an emergency fund for those inevitable 'rainy days' and unexpected costs.
What to do if you have debts
Spending money on interest is a waste - it's money you could be saving. Completing a budget should help you find ways to repay your debts quicker.
Review
Whether you do a simple or more complex budget, review your finances regularly. You may have had a pay rise, or you may have found other ways to save or spend less.
