Save Money by using a Monthly Budget
Many of us find the idea of making a monthly budget daunting as we would rather avoid facing the reality of our financial situation. Experts on personal finance all agree however: maintaining a budget is one of the best ways to save money.
A budget is basically a financial plan comparing income to expenditure. Most of us have only one source of income, our salary, so this goes at the top. Then comes a list of outgoings, grouped into categories such as food, household expenditure, travel etc. These are all added together to give a total monthly income and expenditure. The difference between these two figures is the amount you have to spend or save each month.
If you find that your outgoings are more than your income, you may be relying on credit to get through the month. If this is the case, repaying your debts should be your main priority and creating a budget will help you to focus on this goal.
For many people, finding out just how much they are spending comes as a big surprise as we often don't realise how much the little things add up. When costs such as eating out and buying snacks are added together, it soon becomes apparent how much they can eat into your monthly budget.
The same can apply to spending money on your car. When you add up the cost of finance repayments, fuel, insurance, parking permits, servicing and the annual MOT, you could realise that buying a cheaper car or using public transport would make a huge difference.
When you understand where your money goes each month, you will be empowered to make changes which improve your financial situation. For example, you could set a monthly spending limit for eating out and decide how many times you are able to eat at restaurants each month. You could choose to make your own lunch and take your own snacks to work, or to save money by swapping your gym membership for runs in the park.
Apart from the short term benefit of spending less, saving money using a budget is crucial to your future financial health. Making some room in your budget for a long term investment or transferring some money into a savings account every month will give you the opportunity to save for emergencies, earn some interest on your money and even plan for retirement.
When you create your budget make sure you set goals which are specific, but realistic and achievable. If you enjoy your morning latte before work for example, it may not be the best idea to cut it out completely. Try limiting yourself to buying coffee once or twice a week, or invest in a flask and make your own.
Creating and keeping to a budget is definitely a lifestyle change, so give yourself time to adjust. If you do overspend at first, don't give up - just adjust your plan and keep at it!