Proper budgeting takes a lot more than making entries in two specific columns, one for your income and the other for all your expenses for the month. There are lots of ins and outs of a budget and you will need to follow a specific process for it. If you are not perfect in making the entries then, in the end, you will not be able to see where you stand and your financial health. It will be even more difficult to control your finance should you have one or a couple of loans in your name.
As budget is the best way to take control of your finances, you must be meticulous with this simple yet helpful tool.
Need for a budget
Budgeting will not only help you understand the inflow and out flow of your money but will also show you if you are spending more than you need or less than you can afford. It will enable you to direct the money to those areas that matter most to you. This will enable you in turn to stay on top of your finance and pay the bills as and when required. You will also be able to save money and create a fund to meet your future goals. If you fall short of the total amount of your bills you can make amendments in your budget, curtail a few unnecessary expenses and create more funds.
Therefore, you will need to be meticulous and follow the specific steps for preparing your budget, using it and make proper plans to control your finance and debts as well. It is only then you will be able to sort out the priorities to find and maintain the right balance between income, expenses and saving.
Preparing your budget
Visit sites such as https://www.libertylending.com/or any other to use a free budget planner. These are useful and effective tools that will help you to make a better plan. All you have to do is choose a specific time period to plan money flow. This time period can be for a week, a fortnight or a month which is usually favoured.
- To know where exactly you stand financially to make sure you include all your income from all possible sources. If you are budgeting for a shorter time period, you will need to apportion your income accordingly, which is why a monthly budget is favourable.
- The next step is to include all your regular payments such as house rent, phone and cable bills, electricity and other utilities, grocery and other household expenses, car maintenance and gas or public transport expenses.
- Follow it up with scrutiny and analysis of all financial documents and statements such as your bank and credit card statements, bills, receipts and vouchers, shopping dockets and others. This will enable you to find bill amounts that vary across the time period.
- Next, you must decipher your money priorities considering your basic needs for a living. Find out those things that you can do without for the time being so that you can get rid of the debts or debts that may be bothering you at the moment.
In case you have a variable income, do not make a vague budget. Instead, you should prepare your budget based on the earnings of the past year. Make sure that you include your income from your part-time or full-time job, casual work if any along with pensions, money from all investments, government benefits and child support payments.
Use your budget sensibly
When you are done with categorizing your income and expenses and posting them in the relevant column, take a print of the budget planner. Keep it safe but handy so that when you go to the departmental store next time, you know exactly how much you can afford to spend. Stick to this amount religiously so that you do not upset your finance management program.
- If you want to keep a track of your expenses on the go, then you can either carry a calculator use one of the several free mobile apps. It might take a bit longer while shopping but will be very helpful to put you on top of your expenses.
- If you want to save more money to pay off your debts early, look at those expenses in your budget that you may cut short. Restrict your expenses on fun, leisure, entertainment and personal expenses so that you are focused on your finance and debt management goals.
- Redo your budget from time to time preferably after every 3 to 6 months. This will make your finance management endeavour even more precise and useful. Once you are comfortable with using your budget, you will have to redo it less frequently, maybe once in a year.
Refresh your budget whenever there is any significant change in your income and expenses. It may be losing a job or getting a new one with a higher income, buying or selling your home or car, the additional cost of expanding your family, medical expenses or any significant money inherited or left over.
Utilise extra cash responsibly
You can create separate savings account to put your extra cash as soon as have some. This way you prevent the chance of spending it fast. Apart from that you can make the best use of your extra cash with a lot of things such as:
- You can open a savings account with high interest
- Consider investing in prospective avenues
- You can even visit https://www.libertylending.com/for a loan if you want to fulfil your dream and know that you can afford to repay it back. This will also help you to gain some extra tax benefits on loans.
Therefore, budgeting needs a lot of precise calculation and planning which is why you must consult an experienced credit counsellor.Remember, taking out a loan is a necessity in these days and it is easy to get a loan. Managing the debt is the most crucial thing in finance control and to meet with all the requirements of your creditor.