Posted by Allison on 5 April 2009, 10:57
How good are you at budgeting? Do you know where every penny goes each day? Do you have a rough idea how much money you have in each of your accounts? What about your bills? Do they always get paid on time? Or do you scratch your head and wonder where it all goes to?
Many people struggle with budgeting but it's the most effective tool we have to ensure that we can successfully stay in the black each and every month. The main rule with budgeting is to ensure that we always live within our means but it isn't always that easy to achieve. A proper household budget will ensure that we never run out of money and stay on target to achieve any savings goals we might have.
If you have never set yourself a budget before then you are in good company. Many people around the world don't stick to a budget either. No matter what country people are from or what currency they are used to dealing in, it can be a real struggle to stay on top of things when you don't have a budget to keep you on the straight and narrow.
So let's take a look at how to improve things by working out how to create an effective budget that will work for every currency and every country in the world.
Any budget is essentially worked out as a result of looking at two things – your income and your outgoings. The basic idea is to have as much coming in as possible… and as little going out as possible! This will give you the biggest amount of surplus cash you can have, and you can then create another part of your budget to decide where to start saving some money each month.
In order to work out an accurate budget it is important that you write down exact figures for as many things as possible. Let's take your income as an example. In this case you would make a note of exactly what you get in pay each week or month. Include any bonuses or commissions you are entitled to, but write them in a separate column since these are not necessarily guaranteed.
When it comes to looking at the bills you have to pay, take this as an opportunity to get everything out to see just how much you really do pay for everything. It's worth going online to see whether you can get any services cheaper than you already do, since most people find they can actually save some more money in one way or another. Make sure the sites you check are relevant to your country and they display their charges clearly in your own currency.
Most regular bills will come in specific amounts, but things like your weekly shopping bill are a little different as this can vary from week to week. Some people who set a budget for themselves actually keep a detailed list of everything they spend their money on each week, including what they buy at the supermarket. This can work really well as a method for cutting down your outgoings since you will become much more alert as to where your money is going and how much you are actually wasting.
By creating a budget like this you will start to become in control of your finances and thus free up more spare cash each month to divert towards other needs which you may not currently be attending to.
A good example of this is having a savings account. We should all have a certain amount of money tucked away to help us out in case we should need some cash urgently, but there are a lot of people who simply haven't managed to do this.
If this sounds like you, make sure your budget allows for some spare cash to go into a savings account every week or month – whichever works best for you. Even if it is only a small amount to begin with (say £5 or £10, or the equivalent in your own currency), the process of doing it will make the savings habit grow faster and you will find it much easier to put money away for a rainy day in the future.
Many people find that far from being a boring thing to do, once they have done the initial work of creating a budget they actually start to enjoy the challenge of saving money here and there wherever they can. You may well find you start to think along the same lines.
Once your budget starts to create some spare cash for you, you will be able to look at the various savings vehicles which are available in your own country. Your first priority should be putting your particular currency in whatever savings vehicle offers you instant access and a reasonable level of interest. This needs to be an amount that you can get at in a hurry if you need to.
Once you have a cushion to fall back on like this, you can start thinking about longer term savings to provide for your future. Ideally you can also divide them between safe investments and slightly riskier ones, but always make sure you are happy with the level of risk each investment comes with - otherwise it won't work for you.
So you see, although a budget can be hard work to get started, it comes with a lot of rewards if you keep at it and create one that you can stick to. Like a lot of other people have already discovered, budgeting doesn't have to be boring; it can actually be a challenge that helps you to grow as a person. If you are struggling to get started try setting some goals for yourself that really mean something. Perhaps you would like to save up for something in particular? If so, your budget can help you attain it, so long as you stick to it.