Key tips for beginner budgeters

Budgeting can be a daunting prospect, but it’s essential to get it under control if you’re going to make the most of your finances. If you’re new to budgeting, it can seem like it’s impossible to know where to begin, however. So here are some key tips to help you get started, and to ensure you’re able to get a handle on your finances.

1. Know your income

Before you even begin thinking about budgeting, you have to know what your income is – this will give you the base figure that you can work with. If you have multiple income streams this can be difficult, but if you’re budgeting it’s essential that you have some reliable reference points. That means you should only take into account reliable, repeatable, and dependable income.

Your salary may be prone to rising and falling depending on certain factors, such as sales performance, etc. In this case, look at your earnings over the previous year and determine the lowest figure your salary has never fallen below – this will be the figure you can “guarantee”.

2. Track your outgoings

It sounds obvious, and it is, but to properly budget you need to know exactly what you spend. Take account of all your regular outgoings, such as your utility bills, car payments, rent/mortgage, loan repayments, groceries, etc. If you’re just starting to budget, don’t worry about what you spend on a coffee every now and then, focus on the main bills that are paid out on a weekly or monthly basis.

Some bills don’t occur monthly, but are semi-regular – such as TV license payment, for example, or paying to have your car serviced/MOT’d. If you know these costs are going to arise in a certain month, make them a part of your budget to ensure you can afford them. Think also about other things, such as a night out with friends you have planned, or a family birthday, and what you intend to spend.

3. Make clear notes

One of the most important tips when it comes to budgeting is to start making notes. You can do this the good old fashioned way with a piece of pen and paper, or you can turn to specialist budgeting apps, or use a spreadsheet on your computer (Google sheets is free and very robust) – whichever works best for you.

The idea is that you can get the figures out of your head and into a coherent list, so it’s easy for you to see exactly what you’re earning/spending. This will allow you to easily tot up totals, and see where the largest outgoings in your monthly budget are going to be. If you try and do it all in your head you will forget things, and you’ll ultimately become confused and frustrated.

4. Be honest, be blunt

This is your budget, nobody is going to look over your shoulder and judge you. It can be tempting to begin deliberately underestimating your monthly takeaway budget, or how much you spend on a Friday night out, but it’ll do you no good in terms of making a clear budget.

If your budget is going to work and is going to help you save money, it’s absolutely essential that you’re as honest as possible and use the correct figures. It might be uncomfortable to see how much you’re spending on certain things, but it just shows you where you can make savings.

5. Remember your float

Your float, or your buffer, is an amount of money you have at the end of each week or month that’s “unaccounted for” – you might think of it as spending money. It’s essential that when you’re budgeting you remember how unpredictable life can be, and that you can never predict what sort of bills/situations are going to be around the corner. You need to be prepared for them before they arrive – as otherwise, you are going to be searching around for money from friends and familiy, or via a short term loan when an emergency arises.

If at the end of your budget you have £5 free every month, that’s not going to be good enough and there’s more work to be done finding savings. You want to have at least £50 a month spare to account for spending extra on such things as bills, gas/electricity, food, fuel, clothes, etc.

6. Get started

This is a key tip – don’t procrastinate! It can be the easiest thing in the world to put off starting your budget until tomorrow, next week, or next month. But, before you know it next month has turned into next year, and you still don’t have your finances in order – so make a start now!

Budgeting always seems like such a bigger job than it actually is. Once you get going and start making sense of things, you’ll be amazed how quickly it all starts falling into place. You may also be surprised just how quickly you can put more of your money back into your pocket each month.

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