Improve Your Spending with a Budget

Your bank balance and the availability of money may fluctuate for you and your family throughout the year. There are ups and downs when we talk about the financial resources and income of an individual or family. In dealing with financial difficulties, there is a need to have the budgeting techniques required to balance things or even out your resources throughout the year, making your finances more predictable and less worrisome. It’s about mastering the art of stretching the capacity of our available money.

Money management is a skill that is useful for large corporations, small businesses, families and individuals. To start your budget it’s a good idea to go over two or three month’s worth of past spending. This will give you a base to work from. One month is not enough because there may be anomalies that don’t occur regularly or spending that may only occur on a bi-monthly basis. If you have the ability to go back and look at your spending for a whole year it would be extremely beneficial. You’ll be able to see any trends in your spending.

If you are creating a budget for the first time there are a few tips to follow to make sure you’re not missing anything.

  • Make a note of all your set monthly expenses like, mortgage payment, rent, utilities, car payment, etc
  • Calculate your net monthly income, meaning your take home income or what you’re actually able to spend. This will be your income less any income or other taxes.
  • Work out your average variable spending on things like food, entertainment, gas, etc.
  • Subtract all your expenses (set and variable) from your income. If you get a negative number you’ll have to go back and rework your variable spending until you hit 0 or higher.

Once you’ve created your budget it’s very important to follow it. In order to do this you have to be realistic. For example your budget for entertainment may be set at $100 a month but this may become difficult around the holidays like Christmas. Since you know you will likely be spending more around the holidays you’ll have to spend less on entertainment at other times of the year. Don’t think you’re able to pull money from other sources to do what you want in December. What I mean is don’t take money from your food allowance to spend on entertainment. Entertainment money can only come from entertainment money so it has to come from other months of the year.

Avoid heavy debt with the use of a budget. A budget will teach you to spend what you have. Taking out a cash allowance each week will help to control your spending. Cut up credit cards or hide them to be used for emergencies only. To track your spending when using cash it’s a good idea to keep a budgeting booklet to write down where the money went.

A good budget will help even out your spending through the year but will also allow you to have access to money for emergencies or rainy days. If you live pay cheque to pay cheque things become very tight and stressful when something occurs that requires unexpected spending. Reduce your stress level by being more aware of your finances, you’ll be much happier.

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