You might have heard a lot about budgeting and think that perhaps you should do it. This might be because you want to pay off some debts or spend less money. However, you might not understand what budgeting is or how it works. This is something that is not surprising as it is not something that we are taught at school and so we just have to guess. It can be good to have a better understanding of what to do and then this will help you to do it more efficiently.
What is a Budget for?
A budget is designed to help you to manage your money. It is a way that you can make sure that you are not spending more than you earn. You might think it is not that much of a problem because you can just borrow a bit of money, but you will find that it will add up and you could end up borrowing so much that you cannot even afford the basics that you need because the loan repayments are so high. This can happen to anyone, on any income and so it is really important to make sure that you get in control before it can even start.
How do I do it?
There are different techniques for budgeting and it is a good idea to look into them and find out which will work for you. Some people will make sure that everything they need to pay gets paid as soon as they are paid. So that means they pay off their credit card in full, loan repayments, utilities etc and everything is paid off. Then they know that whatever is left they can then spend. Another technique is to set up a selection of different current accounts and have money transferred into them when you get paid and then you will know that there is enough money allocated to everything and you will not run out. You can also have a spare account for items that you do not pay for regularly like school uniform, car MOT, Christmas etc, which just builds up to be there for when you need it.
However you do it, you will need to start by getting together all of your documents such as bank statements etc and looking at them closely to find out what you normally pay out and when and what money you have coming in. Note down everything that you have to pay for and whether you can afford these things and then what you have left for everything else. You also need to note things which you pay less regularly and then you will know where you are at currently. You can then look at where you can start to cut down if you need to.
Will it Work?
Whether it will work will depend on you. Firstly, you will need to pick a technique that you think will suit you the best. You will also need to be disciplined and make sure that when you do spend money that you ask yourself whether it is within the budget that you have set and whether you can afford it. It can feel like a real chore and you may not like it. Having to cut back on things can also feel like you are being punished. It is important to therefore work hard on staying motivated so that you remember why you are doing it, what you are trying to achieve from it and therefore this will hopefully make you remember why this will all be worthwhile in the end.