Budgeting is important and it may be the difference between how much money you save by the end of the year. A budget is a system that will ensure that you monitor your expenses such that you do not overspend on unnecessary items. But while many people know the importance of a budget many people fail at creating one due to the right format or method to follow. This article will discuss how to create the right budget template.
Before creating the budget be sure of what you need, here you will need to create a list of all your expenses the list should include:
recurring monthly expenses
non recurring expenses
how much money you are earning
your savings goal
Now with all the expenses it is time to create a template. This is easy, on the software that you are using either Microsoft excel or google docs create a category of the items that you are budgeting. separate the obligations from the expenses. Obligations include expenditure on rents and recurring bills such as electricity or the internet. True expenses on the other hand will include expenses on items such as food, clothes and gifts. Once the expenses are categorized it is time to budget.
Step 1: Determine how much you need
With all the expenses laid out before you you need to determine how much each of these expenses will cost. Don’t worry if you have no idea, you can just make an estimate based on how much you spend on each one per month.
Now if you pay your bills monthly it’s advisable to first budget for the obligations before budgeting for other expenses. If your obligations such as rent do not recur monthly then you should make monthly contributions towards them based on the frequency in which they occur. For example, say you pay 4500 dollars for rent after each three months you can decide to make monthly contributions of 1500 towards this obligation. Remember that other expenses are more flexible as compared to obligations so they should always come first.
Step 2: How much money do you have
You can only budget for the money that you have and not any amount you are expecting. You have to distribute these expenses based on how much money is in your account balance. Assign enough money to each category based on your account balance. Now, here is the biggest trick: once you have assigned money appropriately in case you overspend on one category, do NOT go back to your account for more, you simply have to readjust your expenditure on other expenses to cater for overspending.
Keep repeating this process until you have a full understanding of your spending habits. Now, you can readjust your budget based on the new projections that you have noticed.
A budget is key to monitoring your spending and improving your savings. Budgeting will ensure that your income survives to the next paycheck and that you are not living beyond your means. Remember that if you fail to budget then you are budgeting to fail!