Why would you even bother with a budget? After all, you may know roughly how much you spend each month, and how much you make each month, so whats the point? Some people may think of a budget as restrictive, but it doesn’t have to be, it is just showing what you are spending, where, and shows you how much you can actually afford to spend. Before the age of plastic, people knew how to live within their means, they didn’t have credit cards with high interest rates eating away at their income. Now, you can go out and spend thousands you don’t actually have.
For me, a budget helps me see where I can save money. I never had a budget up until about 1 year ago, I just waited for all my bills to come out, then spent whatever was left. Doing this was ok, but sometimes I got confused, and didn’t know how much I actually had left to spend, or if I needed it for something else. I never really saved money either, unless for a holiday or something big, though I had some money set aside for an emergency.
After getting pissed off spending too much several times, leaving myself with nothing, I made a note on my computer, which syncs with my phone, and I wrote down all my outgoings, and income. Who said you have to use spreadsheets? After doing this, I was amazed at how much free money I had after my bills where paid, and wondered where the fuck it went each month, so I looked through my bank statements, and realised that I was spending £200 odd on RedBull and fegs a month, and another £100 on random trips to the local shop. This was an eye opener. Making a budget will help you see your spending weaknesses, just like I did, and will help you improve upon them.
With my budget created, expenses and income listed and totalled, I then worked out how much I could save each month, and also allocated a fixed amount which I could spend on myself. I have made sure that my budget adheres to the 20/30/50 rule. 20% of my income will be saved, 30% will be spending money, and 50% for bills, rent, food and other household expenses.
After working this system for the past year, I have actually been able to save money, and also have money to spend on myself each month, and not have to worry about over spending. I have made a post on how to create a budget, make sure to check it out!
Another common reason for creating a budget is to help you reach a target or goal, for example, going on that holiday you have always wanted to take, or buying that car without monthly payments, or even if its just to help you pay off debt, having a budget in place is always a good idea.
There are a number of tools online to help with budgeting, but me, I just use a note on my laptop. It shows me everything I need to see, which is, how much I spend, and how much I save and invest each month.
Even if you think you don’t need a budget, just create one anyway, you may surprise yourself, and might also be able to save some money in places.