Having a budget allows you to control your finances and save to buy something you want or pay off a debt.
Steps
Step 1. Calculate how much money you make in a month and subtract the taxes
In short, consider the net salary. Include tips, extra income and chores, investments, etc.
Step 2. Calculate your expenses
Keep your receipts for a couple of weeks or, better yet, a month. Knowing how much you spend on grocery shopping and paying bills will make the next step a lot easier. Budgeting without being aware of your releases isn't impossible but it's complicated.
Step 3. Determine your goal so you know how and when you can reach it
Step 4. Divide the budget into categories
Example: Household expenses, Food, Transportation, Entertainment, Savings, Clothing, Medicine and Miscellaneous. You could also divide your expenses into Needs, such as gasoline and electricity, and Hobbies, such as clothing and entertainment.
Step 5. Write down everything you spend monthly for each category
Let's take the Transportation item: 300 euros per month for car payments, 100 euros for insurance, 250 euros for gasoline, 50 euros for maintenance, 10 euros for other expenses related to the car. In total, that's 710 euros per month. If you really don't know exactly how much you spend, try to make an accurate estimate. The more precise you are, the better you can organize your plan.
Step 6. After doing the same with all the other categories, you will know how much you spend, in total, each month
Compare this to your net monthly income.
Step 7. Decide how to keep an eye on your budget
You can use a good old ledger or a program like Quicken or Microsoft Money.
Step 8. Set up your ledger
Leave the first five pages blank; we will be back at a later time. Divide the rest of the book into a number of sections equal to that of the categories you have just established. Make sure you give enough space for each group, especially the food group, which is characterized by multiple transactions.
Step 9. Decide when to do accounting
Generally, it is better to do the calculations at the end of the month. However, many people deal with it twice a month: at the beginning and around the 15th.
Step 10. Divide each category into sub-categories
Taking the example of the car, remember to insert sub-sections such as petrol, insurance, etc.
Step 11. Use the first five pages left blank to write down the income, from which you will subtract the expenses
Thus, you will know how much you have spent and how much you have saved.
Advice
- Get rid of bad habits. Drinking and smoking are two activities that are too expensive (and harmful to health).
- A common problem of “novice savers” is having to deal with a problem, such as the car from the mechanic, immediately after having developed an excellent savings plan. Starting to save money allows you to fix emergencies right away, but after using the money you save, make sure to re-establish the deposit circle.
- If you put your savings under the mattress, it will be difficult to resist whims. Open a bank account that has a good interest rate.
- Another common problem is temptation. In fact, it can happen that you want to buy something, even if you run the risk of exceeding your budget. Enter a category called "Caprices" in the accounting book. In any case, if you really intend to sell to the latest must-have product on the market, put aside the money left over from the other categories. For example, if you have a supermarket budget of 500 euros each month but usually have 100 left over, after a couple of months you can indulge yourself.
- However, these surpluses can also be invested for your starting purpose or put in the bank.
- The first month will be difficult, but DON'T BE DISCOURAGED. The second month will be better already, but it will be around the third or fourth month that you will start to have a working plan. Practice will allow you to improve.
- If the car generates too much expense, consider getting around by public transport or, if possible, on foot or by bicycle (so you will also keep fit!).
- Over time, you may find that the original plan has some flaws. Perhaps, you have underestimated, or overestimated, certain areas or new expenses have emerged. You do not have to worry! The reviews will give you the opportunity to have an even clearer view of your income and expenses. But always remember not to spend more than you earn.
- At first, you may find that you spend more than you earn (without having saved even a cent). By looking carefully at your outgoings, you will probably realize that you have unnecessary expenses. To achieve your goal, you should make some changes.
