Do you ever check your balance and see a completely different figure to the one you were expecting? Has it been weeks since you opened a bank or credit card statement or looked at a summary online? Do you know exactly how much you spend in an average month, and where your money goes? If you answer yes to the first two questions or no to the last, it is time to master the art of budgeting. Once you get to grips with budgeting, it will transform your life!
How to make a budget
Making a budget is incredibly simple. The basic aim is to compare what you have got coming in with what is going out. How much do you earn each month? What other extras do you benefit from? Write these figures down in one column. In another column, write down everything that goes out of your account on a monthly basis. This may include payments for your mortgage, health insurance, and electricity bills, for example. In the next column, jot down one-off costs you expect to incur in the month ahead. Have you got family birthdays, are you going on vacation or is the car booked in for a service? Once you have all these numbers down, you can work out what you have got available to spend or save. This is a traditional way of budgeting, and there are more alternatives that are modern. Some people prefer to stick to pen and paper while others use apps or spreadsheets to manage their finances. Go with the method you find easiest. It can take a little getting used to, but the sooner you start budgeting, the better.
Organizing your finances and protecting your money
Once you have a budget, you have a much better insight into what you are paying for, and this can help you be more organized. If you have got money left over, work out the most effective way to spend it. If you are paying off credit cards, for example, consider making a lump sum to bring your interest payments down. It can also be beneficial to invest in insurance policies if you do not already have them. You will be paying a monthly fee, but this could save you a significant sum in the future. You may not visit a dentist or doctor every month, but imagine how much health insurance will save you if you are involved in an accident, or you need treatment in hospital. You may think that your rental is covered by your landlord, but options like Geico rental insurance policies will protect your personal possessions. Often, paying out a small fee each month will save you a huge sum in the long run. Once you have taken policies out, make sure you update your budget.
If you do want to start saving and you have got money left over each month, shop around for the best accounts. It takes two minutes to compare online, and you may get a much better rate. Once you have opened an account, you can set up a direct debit payment.
If you do not work to a budget, managing your finances and trying to balance spending and saving can become difficult. Hopefully, this simple guide will help you keep track and prevent any unwanted or unexpected surprises.