USE YOUR BUDGET TO PLAN FOR THE FUTURE
Now it is time to work out how much you will spend on expenses over the next y
ear. Use a fresh sheet of paper or a new spreadsheet and set down the amounts, keeping in mind the areas where you could cut back.
Most of us underestimate how much we will spend. It is hard to foresee some of the things we may find we need over the course of a year. For example, you may lose your mobile phone and have to outlay for a new one. Or the price of petrol could go through the roof. One way to overcome this is to increase all of your expenses by 20%. It may seem like a lot, but it’s actually about the amount we misjudge on our spending.
To give yourself the best chance of sticking to your budget, put aside some money from each payday for large annual expenses, like your annual holiday, car insurance or Christmas presents.
Now it is time to work out how much you will spend on expenses over the next y
ear. Use a fresh sheet of paper or a new spreadsheet and set down the amounts, keeping in mind the areas where you could cut back.Most of us underestimate how much we will spend. It is hard to foresee some of the things we may find we need over the course of a year. For example, you may lose your mobile phone and have to outlay for a new one. Or the price of petrol could go through the roof. One way to overcome this is to increase all of your expenses by 20%. It may seem like a lot, but it’s actually about the amount we misjudge on our spending.
To give yourself the best chance of sticking to your budget, put aside some money from each payday for large annual expenses, like your annual holiday, car insurance or Christmas presents.
PLAN FOR SURPRISES
It’s also good to expect the unexpected. How would your budget cope if you became ill or lost your job? Earmark a bit of extra cash for those unforeseen circumstances that could throw a spanner in your plan, especially in the first year or so until you can build up an ‘emergency cash fund’.
As before, add up all your income and expenses and calculate if you will have any money left over at the end to put towards your goals. If not, readjust what you plan to spend until your expenses at least equal your income.
This may mean curbing some of your spending habits, which may take a bit of work on your part. It could be a matter of adjusting your attitude too. Identify any ‘unhealthy attitudes’ to money you could have, such as spending to make yourself feel better or seeing borrowed money as your own.
It’s also good to expect the unexpected. How would your budget cope if you became ill or lost your job? Earmark a bit of extra cash for those unforeseen circumstances that could throw a spanner in your plan, especially in the first year or so until you can build up an ‘emergency cash fund’.
As before, add up all your income and expenses and calculate if you will have any money left over at the end to put towards your goals. If not, readjust what you plan to spend until your expenses at least equal your income.
This may mean curbing some of your spending habits, which may take a bit of work on your part. It could be a matter of adjusting your attitude too. Identify any ‘unhealthy attitudes’ to money you could have, such as spending to make yourself feel better or seeing borrowed money as your own.
STICKING
TO ITTrack your spending throughout the year against your budget so you can see if you are meeting your targets. This will give you an opportunity to readjust your spending plans for the remainder of the year if you need to.
If you continue to budget over the years, you will get better at knowing your spending habits and finding ways to save.
WHEN SHOULD YOU REVIEW?
You should consider redoing your budget each year or making adjustments when your circumstances change. Below is a list of the situations that could trigger a review.
When you:
· Receive a pay rise
· Are married or divorced
· Have a child
· Start a new job
· Move to or from the city
· Start/continue education
· Purchase a car
· Inherit some money or a debt
· Buy a home
· Get a mobile phone
· Suffer an illness that disrupts your income
· Enter retirement
TIP:
BLOWING THE BUDGET?
If you are the sort of person that can’t resist an impulse buy, stop and ask yourself these questions before you hand over your money or credit card. Do I really need it? Am I buying this to make myself feel better? Will this blow my budget?