The Importance of Budgeting
A budget is a summary of all your income and expenses and is an essential process if you are looking to make a big purchase or clear your debt.
You can create budgeting spreadsheets using a pen and paper, computer software or using resources like Google docs to create an online budget. Whether planning a budget online or on paper you will need a number of specific things to hand.
Firstly, make sure you know or can access easily all information regarding your income. You will need to know what you receive each month from your regular employment, pension, benefits or any other exterior source of income.
Secondly, gather all your expenses information. Get copies of all your regular bills such as rent / mortgage, gas, water, electricity and how you pay them (i.e in full each quarter or a set amount each month). Get copies of your recent bank and credit card statements – these are useful to see your outstanding balances, to see if you have missed any payments paperwork and to see what payments you have made that you might not have kept receipts for (i.e. your weekly shop).
Chances are that you have never actually sat down and looked at what you spend your money on – you may be surprised at how much you spend a month on things you don’t remember buying, have never used or simply don’t need.
Lastly, you need to look at what figure is left after you deduct your expenses from your income. Are you spending more than you earn? Is the balance enough to clear your debt or commit to buying that new car? This balance is the starting point to revitalising your finances – now you can look at what you spend and what areas you think are more important.
Budgeting does not mean you have to stop spending – it just enables you to prioritise what you want from your money.