It can feel like an uphill struggle mastering your monthly budget. However, perfecting this skill can be simple and easy when you know where to begin. Understanding the simple core principles of effective budgeting, as outlined below, will ensure you always have money in your pocket when you need it most.
Know What is in Your Budget
You can’t budget effectively unless you know exactly how much money you have to spend each month, so make sure you take the time to calculate your monthly income. You’re looking for a consistent average that you receive every month – this can sometimes be tricky if you’re self-employed, or if you work in sporadic shifts, as your monthly income will therefore fluctuate. If this is the case, then aim for a baseline figure that reflects your earnings as accurately as possible. This figure will then become your monthly budget. This is the first step you should take and should be repeated if your financial circumstances change.
Work out Your Outgoings
Now you know exactly what your monthly budget is, it’s time to look at what you’re spending, also known as your outgoings. You’re aiming for a total figure of your monthly expenditure – this encompasses food, bills, utilities, car payments, rent/mortgage, etc. If you have any monthly debt repayments, they need to be accounted for as well. You will then know how much you’re spending each month, which you can then subtract from your income, with the resulting figure being your remaining money for the month. Make sure to track your outgoings as accurately as possible – use your bank statements, receipts; everything you can.
Surplus or Deficit?
Before you go any further, you need to work out whether you’re operating on a monthly surplus or a deficit. You’re on a monthly surplus if you have money left over from your income after your monthly expenses are paid off. You’re in a deficit if you’re spending more than you’re earning. It’s important to understand this difference, and whether you are in a deficit or surplus, before taking any further action. You’ll have different priorities if you’re operating at a deficit, compared to a surplus.
Streamline Your Expenses
The most efficient way to budget effectively, especially if you’re spending more than you earn (and are therefore operating in a deficit) is to cut out the unnecessary expenses from your monthly bills wherever you find them. Look at your list of regular monthly expenses and see where you can start making cuts. For example, that morning coffee on the way to work might seem essential but multiply this by 5 (each day) and then that figure by 4 (each week), the cost of that morning coffee starts to spiral out of control.
Track how Much you Spend
Spending money without thinking has never been easier, especially now that we have contactless debit/credit cards. Thankfully there are ways to help you track what you spend each day, for example, there are dedicated apps designed for this task. You can also manually write down your spending, either on paper or on your smartphone. This can help you to start cutting out unnecessary expenses. Furthermore, it can also help you to feel more positive about your finances, as you are being pro-active in trying to help yourself.
Using Payday Loans
Payday loans can be an effective method of financial assistance should you encounter an unexpected expense. At Wizzcash we can offer you a short-term loan with amounts starting at £200 and being capped at £1000. We provide loans which are repaid over a 3-month period, giving you time to find your feet again whilst meeting your monthly repayment obligations. We carry out a range of checks before approving your loan so that we can be confident that you are financially able to pay your loan back. If your washing machine suddenly breaks, or if you need to pay for a school trip, then a payday loan could provide you with the solution. You can apply online with an ethical provider in minutes. To find out more about short-term loans then please follow this link.
It’s important to understand that budgeting is something you must do consistently. It’s not something you can do for just a couple of weeks, it must form a part of how you think about your finances, month in, month out. This also means you should regularly review your income, your expenses, and your bills. Times change and companies can make alterations to how much they charge you. Remember to regularly shop around for the most generous rates on your energy bills, and cheaper options for your phone, television, and internet packages.
Effective budgeting can be possible when you know where to start. We hope that this blog has provided you with an understanding of the core elements to start budgeting.