A beginner’s guide to budgeting

posted by in Budgeting

Financial education

Time to add up the pennies

So you’ve compiled a budget, you have it in front of you, but its making no sense whatsoever.  What do you want out of your budget?  What is budgeting? What are the benefits of budgeting?

According to the Oxford English Dictionary a budget is “an estimate of income and expenditure for a set period of time”.

But importantly, while the word budget can imply that you have to do without, this doesn’t have to be the case. By taking the time to study your own spending patterns and habits, can give you an awareness that you may not have previously had.

You can use your budget as a tool to help you live within your means, or a tool to help you control your money by directing it where you want it to go.

Remember that a budget is more than just bills and expenses, it’s your life. 

Most people I speak to on the phone don’t account for the fun things in life, like going for coffee with friends or even renting a film out (which can be bad), but having a budget should not stop you have some fun in your life.

Budgeting tips

Here are seven tips on how to make an effective personal budget:

  1. Decide why you are budgeting, are you budgeting for day to day living or do you have a project or an event coming up that you want to save for.
  1. Start with your income and write it all down. Remember if you get paid weekly, fortnightly or four-weekly to work you figures out per calendar month – you can do this by following this table:

Payment Interval

Multiply By

Divide By

Weekly

52

12

Fortnightly

26

12

Four-weekly

13

12

  1. Start with your essentials: mortgage or rent, Council Tax and any household bills, and then move onto food, clothing, school trips and doctors and dentist bills.
  1. Use your bank statements to help you; it can make a huge difference between what you think you spend and what you actually spend. Do you ever go to the cashpoint, withdraw some money and just spend it? Think about what do you spend that money on; do you get what you need and then spend the rest anyway?
  1. Keep it real! Is there anything you can find a better deal on? Can you change your payment date to suit your payday? Can you reduce you Sky or Virgin Media package or telephone bill?
  1. Your total income, minus expenses, tells you what true disposable income you have at the end of the month
  1. If you need help, get it! Remember a charity like us can offer free and impartial budgeting advice online and on the phone.

You work hard for you money so make your money work hard for you too!

The IFP Financial Planning Week continues throughout this week (21st – 27th November), with a wealth of webchats, online workshops and articles to help you improve your financial situation. You can follow the IFP on Twitter and follow Financial Planning Week on Facebook.

I've been working for StepChange Debt Charity as a debt advisor for the past seven years. I love doing my job and love talking to people. I am going to be honest - I hate budgeting but I do it because if I didn't I wouldn't have any money at the end of the month! Working for StepChange Debt Charity has helped me in many ways and I want to share my experiences and knowledge with other people.

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