Managing your loan repayments, bills and living expenses, and then making sure you have enough money for entertainment or personal spending can be tricky.
With the rising costs of utilities and general living expenses, it's important to plan ahead to make sure you're prepared for upcoming bills, and unexpected ones too. That's where a budget can help. We show you how you can create a budget in just six steps:
1. Collect your recent bank account statements and bills. These should detail your regular expenses such as insurance, electricity, phone and data, as well as those items that you pay for once or twice a year, such as car registration.
2. Depending on your circumstances, decide whether a weekly or a monthly budget is more appropriate. For example, if you get paid each week, a weekly budget may be your best option.
3. Next, work out your average expenses for a typical week or month, including your mortgage, petrol, savings and eating out. It’s also important to take into account annual expenses such as council rates or school fees, and factor them into your budget. If you’re creating a monthly budget, simply divide the annual expense by 12 and make a provision for it.
4. Separate your expenses into fixed and variable. Fixed expenses, such as loan repayments, will usually stay the same, whereas variable expenses like entertainment will often vary from month to month.
5. Use your bank statements and/or payslips to calculate your total weekly or monthly income.
6. Add up your weekly or monthly expenses and income. Ideally, your income amount should be higher or the same as your expense figure. If your spending is over budget, you’ll need to go over your expenses and make some adjustments - start with the variable expenses.
Once your budget is in place and you're aware of where your money is being spent, you’ll have more control over your finances. You'll be able to put more aside for emergencies and start saving for the things that matter to you most.
Following a budget can be made even easier with a separate savings account for bills and expenses. For more information on preparing your budget read our How To.
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