Creating a budget planner does not have to be difficult. Try following these 6 steps...
What are you spending each week or month?
The first step in planning your budget is to buy yourself a little notebook that fits in your pocket and track your every expenditure for 3 months. This will give you a fairly accurate idea on what you spend in different areas other than your main predictable bills.
The alternative is, if you never use cash and always your credit, you can use your statement to track what you are spending in different areas.
When budgeting, you need to break up each form of expenditure into categories. For example: food, clothing, entertainment, rent, loans, car etc. Make sure you include all the predictable bills that come throughout the year. Total up each of the categories and divide by 3 so you know a monthly expenditure / spending total.
Take this a step further and categorise your list under 3 headings: Priority Budget Expenses, Saving Budget Expenses & Living Budget Expenses.
Priority expenses are those you have no choice about. They cannot be changed and must be paid no matter what. For example, your home phone bill, your car registration etc. I put my giving amount in this list because the priority list is what you pay first out of your income.
The Savings Expenses are your savings goals you are working towards.
The last list is the Living expenses. The Living expenses are all your changeable expenses like petrol, food, gifts, clothes etc. They are areas you can cut back on when you need to. Magazine subscriptions, pay TV, gym memberships to name a few more.
Add up all the forms of income you have so that you know what you will receive each month. Consider your wages, Centerlink, child payments, investments, rental income etc). This should create the limits for budget planning.
Compare your income with your expenditure list. How do they compare? Was there much left over? When you spend without a plan, you always spend more than what you have. Review the budget planning list you have created and decide how much you would like to set for each item.
The Priority list will not change because those amounts are out of your control (except for the giving but commit to keeping the amount constant week to week). You need to be realistic about the amount your set under your Savings list but you want that kept constant too.
Do you need to delete some items from your Living list?
Or cut back the amount you spend in each area?
Put your budget planner to work. This is probably the hardest part. How do you make sure you keep to your budget plan now? How do you save up those bits of money in each of their categories?
a) Different bank accounts – some banks let you have different linked accounts so you can put a label on each one and keep a track of how much you have available for that item. Be careful because some banking institutions charge a lot of money for this priveledge and can ruin your budget planner over the year. I’m with a credit union and this service is free so it works very well.
b) Keep it all in the one account and just keep a record of what is meant to be in each budget category in an exercise book or on an excel document. This is called a budget planner and they are great at helping you see clearly what you have. The down side is they require you to be diligent and up to date with recording what you do with your money!
c) You can be even more high tech and buy a budgeting planner which can be complicated to use but automate a lot of your transactions for you and you can do all your banking through them and they will reconcile balances with your bank account. They are particularly good if you run your own business. There are different versions available for what you need.
d) Go really simple and withdraw the cash and keep it in different envelopes. Except for the money that is for long term items. That can be placed in accounts that reward you for no withdrawals so you get a better interest rate on them. Using cash stops you from spending more than you have or dipping into money from other areas. When it’s gone, it’s gone. It’s great for teaching us to be more careful.
I have found that using a combination of the above works for me. It’s a real individual preference for how you build your budget. But whatever you do, you need to create a budget planner!