5 easy steps to create a budget you’ll stick to

Though budgeting can seem difficult to begin with, especially if you’ve never budgeted before and are used to spending without ever looking back, not budgeting at all can be dangerous. Rather than seeing budgeting as setting yourself restrictions, see it as setting yourself a goal of how much you aim to spend each month instead.

Setting a budget helps us to understand our spending, where we could cut back and if we’re on track to hitting our financial goals. Once you’ve gotten the hang of budgeting, you may actually find it rewarding.

 So, here are our 5 key steps to consider when creating a budget from scratch:

Your budget should be yours

It’s easy to end up comparing ourselves with someone else’s financial situation, especially on social media. Remember that everyone’s financial journey is different, and that what you see on social media isn’t always a reality of someone’s financial situation. Your budget should reflect your own financial situation and goals - not anyone else's!

Know your income

Knowing your income and where it’s coming from will let you know how much you have to work with, so that you know exactly what you can afford. Whether you’re paid on a monthly salary, a weekly wage that differs week on week, self-employed or have multiple side hustles, make sure you’re clear on what you have coming in each time you’re paid.

List out all of your expenses

Imagine a world without expenses - a lot of our financial burdens would be very much non-existent. Though sadly this isn’t the case, it’s crucial to know all of your fixed and variable expenses. Your fixed expenses include things like phone bills, rent and repayments (expenses which stay the same every month), whereas variable expenses include groceries, transportation costs, car maintenance etc (expenses which fluctuate). 

Knowing all of your expenses lets you know where you could cut down on spending or find cheaper alternatives.

Decide how much you want to pay your savings

Whether it’s saving for a holiday, house deposit or simply having a cushion of savings for those rainy days, you don’t want to neglect your savings when deciding your budget. Decide how much you want to put away every month and get into the habit of treating your savings as if it were an expense. 

Set yourself a monthly spending budget

When deciding your budget, remember to account for the things that might creep up and cost you a bit more than you expected. Allocate some money for non-essential categories whether that be eating out, shopping, entertainment etc. If you see that you’re overspending in one area, adjust your spending in another to ensure that you’re not dipping into the rest of your budget or savings.

Remember a budget is an ongoing thing, and shouldn’t be something you do once and set aside forever. To truly master your budget, get into a routine of monitoring your spending and adjust accordingly. You may find that you’ve overspent in one category and so should cut back on another, or, that you’ve underspent in one category so decide to put the money towards your savings. Life happens, and sometimes unexpected expenses creep up, so try to take the time to review your budget!

To know more about budgeting and the most common types of budgeting methods, stay tuned for our next budgeting blog where we’ll break it all down!

The following is for general information and is not intended as a form of financial advice by Finndon or its representatives, nor the information intended to be relied upon by individuals in making any financial decisions.

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